Market attention is focused on US CPI (inflation).
Meanwhile, sterling remains under slight downward pressure in early afternoon European trading as investors weigh on the July inflation report. In today’s US session, market participants will closely follow the US consumer price index (CPI) data. Meanwhile, on the European economic docket, revised second quarter gross domestic product (GDP) and June industrial production data will be released.
After a shaky performance on Monday, the $INDEX US dollar index turned lower in Tuesday’s US session as risk appetite took control of the market. Wall Street’s major indices posted strong gains, with the Nasdaq Composite leading the rally, rising 2.5 per cent, while the $INDEX US dollar index lost 0.5 per cent. On a monthly basis, CPI is forecast to rise 0.2 per cent in July, following a 0.1 per cent decline in June. Core CPI, which excludes volatile food and energy prices, will rise 0.2% over the same period.
In the early hours of Wednesday morning, Britain’s Office for National Statistics said annual CPI rose from 2% to 2.2%. This was below market expectations of 2.3%. In addition, the annual core CPI rose by 3.3 per cent, compared to a rise of 3.3 per cent in the first half of the year.
Other details of the report show that the annual PPI inflows rose by 0.4% and the retail price index rose by 3.6%, against analysts’ forecast of 3.3%. Following this data, GBPUSD turned lower and was trading in negative territory below 1.2850 at the time of writing.
From the Pacific session, the Reserve Bank of New Zealand (RBNZ) announced that it would cut the policy rate by 25 basis points to 5.25% after its August meeting. ‘We are confident that inflation has returned to the target range and we can begin to normalise rates,’ RBNZ Governor Adrian Orr told a press conference after the meeting. NZDUSD has faced strong selling pressure following the RBNZ event and is trading just above 0.6000 at the time of writing, down more than 1% daily.
Meanwhile, USDJPY failed to make a decisive move in either direction yesterday Tuesday, and continues to move sideways, just above 147.00 during European hours on Wednesday, the major currency pair EURUSD broke its weekly trading range on Tuesday and gained more than 0.5%. The pair continues to rise in the European session and is trading a few pips above 1.1000 at the time of writing.
Gold experienced a technical correction after strengthening on Monday and suffered minor losses on Tuesday, but is now relatively quiet at around $2470 early Wednesday.