Lower inflation numbers move US dollar demand
Daily Currency Update
Crucial inflation data released this morning helped lower demand for the US dollar. The US Dollar Index was down a fifth of a percent over the past 24 hours after the Consumer Price Index only increased 2.9%, the first-time inflation was below 3% since 2021. With inflation moderating, the Federal Reserve may turn attention to the labor market.A disappointing jobs report in the US has strengthened expectations for the Federal Reserve to cut borrowing costs multiple times this year. Federal Reserve Chairman Jerome Powell indicated that there is currently a “real discussion” about reducing interest rates at their next meeting, with a 25-basis point cut already fully priced in, and markets assigning a 55% probability of a 50-basis point cut in September.
Key Movers
In Europe, the German economic sentiment indicator (ZEW), a key measure of investor confidence, dropped to 19.2 yesterday. ZEW President Achim Wambach noted that “economic expectations are still affected by a high level of uncertainty, driven by ambiguous monetary policy, sluggish growth in the Eurozone, and ongoing fears about escalating tensions in the Middle East.”In the UK, average weekly earnings rose by 5.4%, exceeding the Bank of England’s projection of 5.1%. However, total earnings growth slowed to 4.5%, falling short of expectations by 1.2%. This deceleration in wage growth could give the Monetary Policy Committee more leeway to lower interest rates at their next policy meeting.
The Canadian dollar faced mild selling pressure as oil prices have corrected gradually after a one-way rally. Oil prices have fallen while investors look for fresh developments on conflicts between Iran and Israel in the Middle East. It is worth noting that Canada is the leading exporter of oil to the US and lower prices of black gold weighs on the Canadian dollar. Oil price trades lower again after snapping a four-day winning streak on Tuesday.
Expected Ranges
- EUR/USD: 1.0982 - 1.1042 ▲
- GBP/USD: 1.2813 - 1.2868 ▲
- AUD/USD: 0.6609 - 0.6643 ▲
- USD/CAD: 1.3700 - 1.3722 ▼