The Canadian dollar rallied overnight, despite Australian and New Zealand dollar weakness, and was the best performing major G-10 currency against the U.S. dollar. The greenback was cautiously bid as the U.S. April inflation report looms.
Have Federal Open Market Committee officials peeked at today’s inflation numbers? U.S. Consumer Price Index is expected to rise 3.5% y/y, a tad above the Fed’s target of "inflation averages 2% over time and longer-term inflation expectations remain well anchored at 2%." Yesterday, a flock of Fed speakers, including Philadelphia Fed President Patrick Harker, and Atlanta Fed President Raphael Bostic, saying it was premature to start talking about tapering and that it was appropriate for monetary policy to remain in "accommodative mode." Bond traders may feel differently with an upside surprise to CPI.
Overnight, Asia equity indexes fell, following in the footsteps of Wall Street. Japan’s Nikkei lost 1.6%. European bourses traded better, helped by improving eurozone data. The U.K. FTSE 100 and German Dax indexes are higher. At 6:15 am ET, S&P 500 futures are in the red, gold prices are unchanged and WTI oil a tad higher. 10-year Treasury yields are steady at 1.615%.
EURUSD dropped to $1.2117 in Asia then rallied to $1.2150 in Europe before sliding to $1.2134 in New York, as traders jockey for position ahead of the U.S. inflation report. EUR/USD found support from firm Industrial Production data and upgraded EU Commission growth forecasts. The EU raised its2021 Gross Domestic Product estimate to 4.3% and the 2022 GDP forecast to 4.4%. Both were previously estimated at 3.8%. The EUR/USD uptrend from the beginning of April is intact above $1.2040, a level guarded by support at $1.2110.
GBP/USD price action tracked EUR/USD moves in a $1.4109-$1.4148 range with prices boosted by U.K. GDP results which rose 2.1% m/m in March. The results supported the Bank of England's 2021 GDP forecast of 7.25%. Manufacturing and Industrial Production were higher than forecast. The GBP/USD outlook is bullish above $1.4100, looking for a test of $1.4250.
AUD/USD traded in a $0.7787-$0.7843 range. Prices dropped on concerns that Australia’s latest budget will lead to a loss of its AAA rating.
The U.S. inflation report is the only data of note today.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
