USD plummets following weak CPI data

Key Movers

The EUR/USD pair extends its gains to reach a two-month high climbing from 1.09230 to 1.09755, this increase is largely driven by today's poor US CPI data. EUR/USD appears to be moving in the upward direction as today’s lower-than-expected CPI data out of the US has investors turning towards more risker currencies and increasing the likelihood that the Fed will take on a less hawkish stance towards rates. Meanwhile, the European Central Bank (ECB) is expected to continue raising its policy rate in the following months as it fights inflation. ECB Vice President, Luis de Guindos, is scheduled to speak later today.

The sterling comes in positive for the second straight day as it rebounded from an intraday dip near 1.24040 to hit the 1.24450 mark against the USD. The pound’s strength can be attributed to today’s weaker-than-anticipated US CPI data, the overall shift towards risk, and investors’ expectations that the Bank of England (BoE) will raise rates to combat inflation. In addition, a stronger-than-expected economy due, in part, to lower energy prices, also lends support to the pound. BoE President, Andrew Bailey, is scheduled to speak later today.

USD/CAD fell below the 1.34500 mark as the Canadian dollar strengthened against its US counterpart. In a widely anticipated decision, the Bank of Canada (BoC) chose to maintain its benchmark interest rate at 4.5%. Speaking at a press conference later today, BOC Governor, Tiff Macklem, will provide his analysis of the policy outlook and answer questions. In its policy statement, the BoC noted that it will continue to gauge whether its monetary policy is adequately restrictive. The BoC also stated that they are prepared to increase rates if the governing council deemed it appropriate. On the oil front, the barrel price is gaining positive momentum for another straight day as it trades near 82.64. The upward movement in oil prices comes because of optimism surrounding China, one of the biggest energy consumers. This optimism continues despite concerns about geopolitical tensions between China, Russia, and North Korea as well as supply shortages by the Organization of the Petroleum Exporting Countries group.