The much anticipated US CPI data came out a lot stronger than expectation last night and led to sharp moves and high volatility across the financial markets. The month on month data beat expectation by 0.2% and so did the year on year numbers, the FX market reacted predictably and the dollar was bought across the board as UST yields moved to the topside.
However, this move was relatively short lived as the equity markets reacted strongly and the dollar bears came into the market in a big way, reversing the move and adding to it as the equities continued to make ground. The Retail Sales numbers were released at the same time and they were worse than expected which added to the resultant dollar bearish sentiment.
The Dxy peaked just above 90.00 but finished the day well down just under 89.00. We saw sharp and hard moves across all the major currencies with technical levels breaking on both sides and most currencies seeing there biggest two way moves of the year.
Looking ahead to today’s trading and the Aussie will be under the microscope as we have employment data due at 11.30 this morning. Market expectation is for an employment change of +15k with the Unemployment rate remaining at 5.5%, any large deviation from expectation should see further moves in the currency. It’s another relatively quiet day after that in terms of fundamental economic data releases with little out in the London session and just the US PPI data due in the New York time zone. Investors will continue to monitor the equity markets closely as the trading day progresses and FX traders will be looking for fresh levels to sell the dollar while the current sentiment dominates.
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