EU/US Inflation Data Remain the Driving Force
- Dollar Index (DXY) faces its third consecutive day of decline ahead of important inflation data from Europe and the U.S.
- Despite the Eurozone’s headline CPI reducing to 5.1%, the US Core PCE Price Index may rise to 4.2%, possibly benefiting the US dollar.
- A decline in US yields influenced gold prices to a month-high, while Bitcoin and Ethereum fell slightly, trading at around $27,200 and $1,700 respectively.
Following Wednesday’s volatile action, major currency pairs remained relatively quiet early Thursday. Following the release of the Monetary Policy Meeting Accounts by the European Central Bank (ECB), market participants will watch the Eurozone inflation figures closely.
The Federal Reserve’s preferred measure of inflation, the Personal Consumption Expenditure Price Index (PCE), will be featured on the US economic docket in the second half of the day.
Price pressures are easing in the Eurozone, but ECB hawks are unlikely to be satisfied. According to the Bureau of Economic Analysis, the annualized growth rate for the second quarter Gross Domestic Product (GDP) decreased to 2.1% from 2.4% previously. In August, ADP reported 177,000 new jobs in the private sector, but less than the 195,000 market expected.
Following these disappointing data releases, the benchmark 10-year US Treasury bond yields declined toward 4%, and the USD struggled to find demand during American trading hours. The US Dollar Index (DXY) closed the third straight day in negative territory. Although DXY holds steady at 103.00 in the European morning, it is down nearly 1% since March 1.
Today’s Market Expectations
Today, we have more inflation figures from the Eurozone and the US, which are expected to reveal mixed results. China’s data will be the first to be released. Risk sentiment is expected to deteriorate further as the manufacturing PMI falls deeper into recession, while services PMI is forecast to remain steady but soften further.
According to yesterday’s Spanish CPI inflation data, the French CPI will increase this month, ahead of the Eurozone CPI for August. However, the Eurozone CPI is expected to slow down, with the headline CPI dropping two pits to 5.1% from 5.3% previously and the core CPI dropping two pits to 5.3% from 5.5%.
There will be another unemployment report in the US session, with the Unemployment Claims expected to remain the same. While this would support the USD, we also have the Core PCE Price Index report, which is expected to increase from 4.15% to 4.2%, boosting the USD.
In early Thursday, EUR/USD went into a consolidation phase slightly above 1.0900 after reaching its highest point in two weeks near 1.0950 on Wednesday.
After registering gains for three straight days on Wednesday, the GBP/USD pair lost its bullish momentum in the European morning on Thursday. At publication, the pair was trading negatively at about 1.2700.
On Wednesday, USD/JPY recovered modestly following Tuesday’s decline. The pair last fluctuated at 146.00 in a tight channel.
Wednesday’s gold price hit a month-high near $1,950 on the strength of falling US yields. The gold price consolidated its weekly gains near the mid-$1,940s in the early European session. After Tuesday’s impressive rally, Bitcoin lost more than 1% on Wednesday. Bitcoin/USD remained calm at around $27,200 in the European morning. Ethereum is trading sideways near $1,700 after losing 1.4% on Wednesday.
« Fractals: Advanced Technical Tool for Forex Traders How to Handle an Uncertain Market in Forex? »
