Forex Morning Briefing
Commentary: Pressure on the Buck. PE
US Consumer Price Index (CPI) increased 0.2% in April, less than the 0.3% rise projected. Naturally, there was a disappointment from USD Bulls after the index fell short of halting Bullish views on the US inflation outlook.
The markets had already moved off the EUR/USD low point on profit taking before the inflation print, so the USD setback was tame given the breadth of USDs recent rally, and USD buyers are alive in here still.
In the US the way to inflation has been directionless and frustrating, and short-term views are consumed by the headlines, as the NY Feds underlying inflation gauge as measured by many dis-aggregated price series in the CPI index is punching higher.
That suggest that US inflation closer to taking spotlights.
Certainly, the CPI miss is not enough to shift the Fed outlook, but the markets will be more cognizant for Fed speak and US retail sales to provide the next USD sign.
Given the Dovish display by other central banks, the FOMC appears to be the last man standing, as speculation about interest rate rises and policy normalization in the Eurozone, Japan and Britain get kicked ahead.
Suggesting USD should remain at minimum pressure over the next few weeks, but the politically challenged Buck is building an argument for some longer-term views.
Overall, it remains challenging to see just how much the EUR/USD can fall given the inflationary aspect of the weaker EUR, and the strong rally in Crude Oil over the past 2 months which may reignite inflation in the EU.
Have a terrific weekend