Daily Currency Update

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Consumer prices rise more than expected

USD - United States Dollar

The US dollar ticked up right after a key report showed US consumer prices rose in May more than expected. The Consumer Price Index (CPI) showed that inflation in the US rose 5% on a yearly basis, above analyst expectations of 4.7%. The index, which measures the change in price of a fixed basket of goods and services bought by US consumers, climbed 0.6% last month. In April it had surged 0.8%, which was its biggest gain since 2009.

But as market participants digested the data, USD failed to make any significant gains across the board. Some analysts predicted a higher than forecast CPI print could push up demand for USD. But some attributed the monthly surge in prices to the rapid reopening in the US. Businesses are grappling with a rush of demand against shortages of materials and labor, pushing prices up for now. This is in line with the US Federal Reserve’s view on a ‘transitory’ inflationary period, which means USD may continue to see some pressure in the near to medium-term.

Key Movers

EURUSD edged higher after a slight dip following the European Central Bank’s interest rate statement. The central bank left rates unchanged and said that it would stick to its bond-buying program. EURUSD was up 0.09%, trading at 1.2189 at the time of writing.

Demand for the pound climbed after news of higher than expected inflation in the US. GBPUSD climbed 0.26% to 1.4149 at the time of writing. But other domestic factors could weigh on the pound, including COVID-19 and Brexit developments. A fresh spike in COVID-19 cases could possibly delay England’s reopening on June 21st. The escalation in tensions over trade rules in Northern Ireland has driven the pound lower, with US President Biden adding pressure to end the standoff. GBPUSD was up 0.29%, trading at 1.4154 at the time of writing.

AUDUSD and NZDUSD also moved higher after the release of the US CPI data, up 0.25% at 0.7749 and up 0.32% at 0.71985 respectively.

Expected Ranges

EUR/USD: 1.214 - 1.219 ▲

GBP/USD: 1.408 - 1.416 ▲

AUD/USD: 0.772 - 0.775 ▲

USD/CAD: 1.207 - 1.212 ▼