US Dollar Weakness Possibility Prior to BoE Rate Call and ECB Speakers

US Dollar Slides After CPI Print

 

What Happened? – US Dollar Weakness

 

The US Dollar went down after the Consumer Price Index (CPI) was released. The headline CPI showed that prices went up by 4.9% from April last year, which is lower than the expected 5.0%. The Core CPI, which is a measure of prices without food and energy, was as expected at 5.6%.

 

What Does This Mean?

 

People are now betting that the Federal Reserve (Fed) will lower its target rate by the end of the year. This is because the futures and overnight index swaps (OIS) markets predict that the Fed will cut its monetary policy by almost 25 basis points (bp) at the September Federal Open Market Committee (FOMC) meeting.

 

Other News

 

The US Treasury Secretary, Janet Yellen, spoke at the G-7 Finance Ministers meeting in Tokyo. She talked about the importance of solving the US debt ceiling issue.

 

China’s inflation rate was also lower than expected. The headline CPI showed that prices went up by 0.1% from April last year, which is lower than the expected 0.3%. The Producer Price Index (PPI) was also lower than expected at -3.6%.

 

What About Currencies?

 

The British Pound (GBP) is still near its 12-month high against the US Dollar. The Bank of England (BoE) is expected to raise its interest rates by 25 basis points (bp) to 4.50%. The Japanese Yen (JPY) is little changed against the US Dollar at 134.25.

 

Technical Analysis – US Dollar Weakness

 

The EUR/USD currency pair is at risk of going down. It is currently above several potential support levels, but if it breaks below the 1.0910 – 1.0945 area, it might go down even more. On the other hand, if it goes up, it might face resistance at the previous peaks in the 1.1075 – 1.1100 area.