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The U.S. dollar resumes its uptrend after higher than expected producer prices

USD - United States Dollar

The U.S. dollar index, which has the top 6 major currencies in its basket including the Euro, increased 0.33 percent this morning. The reason? Higher inflation numbers, which might boost consumer price index numbers, which will be released tomorrow. At least that is what market participants are expecting this morning. According to the U.S. Bureau of Labor Statistics, the Producer Price Index (PPI) for final demand rose 0.1 percent in August, versus the 0 percent increase expected. Final demand prices moved up 0.2 percent in July and 0.1 percent in June. The index for final demand less foods, energy, and trade services or Core PPI rose 0.4 percent in August, versus the 0.2 percent increase expected, following a 0.1 percent decline in July. For the 12 months ending in August, prices for final demand less foods, energy, and trade services moved up 1.9 percent.

China is seeking to ease the impact of the trade war. It revealed a range of U.S. goods to be exempted from 25 percent extra tariffs put in place last year (e.g. pharmaceuticals, fish food, pesticides, and lubricant oil, etc.) without lifting charges on major agricultural items like corn, soybeans and pork producers. China's tariff retaliation strategy is firmly focused on constraining the trade of agricultural and manufactured goods produced in the U.S. states that most influence the re-election of President Donald Trump.

Key Movers

The European Central Bank is expected to announce a range of stimulus measures tomorrow, with the FX markets waiting excitedly for the particulars of a plan that could include both lower interest rates and recent bond purchases. The ECB's current deposit rate is minus 0.4 percent, something without precedent. The EUR/USD is trading at trading at 1.0998, falling 0.40 percent, and, while the GBP/USD pair is trading at 1.2328 this morning, decreasing 0.20 percent.

The USD/CAD pair trades flat this morning at 1.3156 after crude oil prices momentarily dropped by more than 2 percent in yesterday’s trading session as traders speculated that Bolton's departure in the U.S. may signal a less hawkish U.S. foreign policy towards Iran and Venezuela. Bolton had exerted a hawkish influence, at times advocating military action, while Trump has avoided overseas intervention. However, at this moment, crude oil trades 0.25 percent higher.

Prime Minister Justin Trudeau is expected to officially kick off Canada's election campaign today ahead of a planned Oct. 21st vote. He's set to meet with Governor General Julie Payette, Queen Elizabeth II's representative, to solicit the dissolution of Parliament today, marking the formal start of campaigning. However, neither his Liberal party, nor the opposition Conservative party is polling high enough to win a majority of the 338 seats up for grabs, meaning the next Parliament could be more fragmented than the current one.

Expected Ranges

USD/CAD: 1.3117 - 1.3164 ▲

EUR/USD: 1.0982 - 1.1010 ▼

GBP/USD: 1.2274 - 1.2379 ▼

AUD/USD: 0.6830 - 0.6890 ▲

NZD/USD: 0.6391 - 0.6499 ▼