Dollar edges higher ahead of US CPI, EUR, AUD dip

GBP flat, USD/JPY climbs, EMFX mixed; Stocks slip

Summary

Ahead of tonight’s US CPI report, the Dollar Index, a popular gauge of the Greenback’s value against a basket of major currencies, climbed to 101.25 (100.90) in quiet trade.

The ongoing US debt impasse weighed on sentiment and supported the US Dollar. The Euro (EUR/USD) fell 0.35% to 1.0965 from 1.1030 yesterday. USD/CHF rose 0.1% to 0.8907 (0.8897).

Sterling (GBP/USD), however, was little changed, at 1.2620. Markets expect the Bank of England to raise its Official Bank Rate to 4.5% from 4.25% when they meet on Thursday (12 May).

Against the Japanese Yen, the US Dollar rallied to 135.21 (134.78). The ten-year US treasury bond yield climbed 8 basis points to 3.52%. Other global treasury rates rose.

The US Dollar finished mixed against the Asian and Emerging Market Currencies (EMFX). USD/SGD (Dollar-Singapore Dollar) rose to 1.3275 from 1.3265 while USD/CNH (Dollar-Offshore Chinese Yuan) rose to 6.9250 (6.9150). Against the Thai Baht (USD/THB) the Greenback slid 0.5% to 33.70.

The Australian Dollar (AUD/USD) slipped 0.3% to 0.6762 from yesterday’s 0.6792. Economic data released yesterday saw Australia’s Retail Sales slide -0.6% in Q1, which was larger than the -0.4% expected. The Kiwi (NZD/USD) edged lower to 0.6335 (0.6355 yesterday).

Australian Treasurer Jim Chalmers released the Australian Budget for fiscal year 2023-2024 last night. Chalmers forecast a balanced annual budget, the first time in 15 years.

Germany’s Industrial Production fell by -3.4%, larger than the -1.6% forecast by analysts. The Eurozone Sentix Investor Confidence Index slid to -13.1 from the previous -8.7.

UK Annual BRC Retail Sales rose 5.2%, beating estimates at 4.7%, and larger than the previous 4.9%.

Japan’s Average Cash Earnings (y/y) eased to 0.8%, lower than estimates at 1.0%.

China’s Trade Surplus rose in US Dollar terms to USD 90.2 billion, up from a previous USD 88.2 billion, beating estimates at USD 71.6 billion. Britain’s Halifax House Price Index slipped to -0.3% from 0.8%.

EUR/USD – The shared currency dipped 0.35% against the US Dollar to 1.0965 in late New York (1.1030). The Euro rallied to an overnight high at 1.1009 before easing toward the close of trade. The overnight low recorded was 1.0941.

USD/JPY – Edged higher to 135.21 at the close of trade in New York. Overnight, the USD/JPY pair climbed to a four-day high at 135.37 before easing. The overnight low traded was 134.72. Higher US treasury bond yields boosted the Greenback against the Yen.

AUD/USD – The Aussie Battler slid against the Greenback to finish at 0.6762 from yesterday’s 0.6792. In relatively slow trade, the overnight high recorded was at 0.6787 while the low traded was at 0.6746. Today’s US CPI report could trigger volatility in the Aussie.

GBP/USD – Sterling closed virtually flat against the US Dollar at 1.2620 (1.2622 yesterday). The overnight high traded was at 1.2640. Trade was lively in the British currency. The overnight low recorded was 1.2578. The BOE is widely expected to hike rates by 0.25% at the conclusion of their meeting Thursday (11 May).

On the lookout

All eyes focused on the US CPI report later today. Prior to that, Japan kicks off today’s economic data releases with its Leading Economic Index for March (f/c 97.9 from 98.0 – ACY Finlogix).

Germany starts off Europe with its April Final CPI (m/m f/c 0.4% from 0.8%; y/y f/c 7.2% from 7.4% - ACY Finlogix).

Italy follows with its March Industrial Production (m/m f/c 0.3% from -0.2%; China releases its New Loans data (f/c CNY 1400 billion from previous CNY 3890 billion – Forex Factory), Chinese April Foreign Direct Investment (y/y no f/c, previous was 4.9% - FX Street).

Germany starts off Europe with its German April Final Inflation Rate (m/m f/c 0.4% from 0.8%; y/y f/c 7.2% from 7.4% - ACY Finlogix).

Italy follows with its March Industrial Production (m/m f/c 0.3% from -0.2% - ACY Finlogix).

Canada starts off North America with its March Building Permits (m/m f/c -2.9% from 8.6% - ACY Finlogix), and finally the US releases its April Headline CPI (m/m f/c 0.4% from 0.1%; y/y f/c 5% from 5% - ACY Finlogix), US April Core CPI (m/m f/c 0.4% from 0.4%; y/y f/c 5.5% from 5.6% - ACY Finlogix).

Trading perspective

The Greenback continued to gain overall versus its Rivals heading into tonight’s crucial US CPI report. While global bond yields rose, the gap between the US rates and global rivals widened (in favor of US yields), which also supports the Dollar. Expect Asia to trade familiar ranges today as markets await the latest US inflation data.

EUR/USD – The shared currency saw persistent selling pressure against the Dollar, edging lower to close at 1.0965. On the day look for immediate support at 1.0940 (overnight low traded was 1.0941). The next support level lies at 1.0910. On the topside, immediate resistance can be found at 1.1000, 1.1040 and 1.1080. The wider 1.0940-1.1100 level appears intact. However, a surprise in the US inflation report could see a breakout.

AUD/USD – The Aussie Battler slipped against the Greenback to 0.6762 from yesterday’s 0.6792. Overnight, the Aussie traded to a high at 0.6787. For today, look for immediate resistance at 0.6790. The next resistance level lies at 0.6820. Immediate support lies at 0.6740 followed by 0.6700. Look for consolidation in a likely range today of 0.6740-0.6790. A strong US CPI report could see a downside break in the Aussie. While a weak number could see the Aussie above 0.68 cents. Meantime, trade the range.

(Source: Finlogix.com)

USD/JPY – The Dollar/Yen pair had a relatively tame trade yesterday, finishing up 0.10% to 135.21 (134.95 yesterday). On the day look for immediate resistance at 135.40 to cap (overnight high traded was 135.37). The next resistance level is found at 135.80. Look for immediate support at 135.00 and 134.70 (overnight low traded was 134.72). Look for consolidation in a likely range between 134.50-135.50 today. Watch the 10-year US bond yield, it will continue to drive this currency pair.

GBP/USD – Sterling finished flat against the US Dollar at 1.2620 (1.2622). Markets expect the Bank of England to hike rates by 0.25 basis points at the conclusion of their meeting tomorrow (Thursday, 11 May). This would put the UK prime interest rate at 4.5%, the second highest among the G7 nations. Look for immediate resistance at 1.2640 (which was the overnight high). The next resistance level is found at 1.2680. On the downside, immediate support lies at 1.2580 followed by 1.2540. Likely range today, 1.2550-1.2650. Sell rallies.

Happy trading all, have a top Wednesday ahead.