FOREX: Dollar fluctuates as US inflation rate rises

THE United States dollar fluctuated Thursday, first higher on the stronger-than-expected CPI data and a further decline in initial jobless claims, then falling back later in the day. Currencies traders that lose guard would have counted losses as the dollar exhibited rude fluctuation following new data release from the United States.

While the inflation reading was above expectations for a second straight month, the size of the price increase and the magnitude of the miss was smaller than in April, alleviating the fear of another huge upside surprise.

There are no key economic data releases on Friday or Monday, but Tuesday’s data schedule, which includes retail sales, PPI and industrial production, will give a running start into Wednesday’s FOMC announcement.

A summary of Thursday’s foreign exchange action according to traders charts:

EUR-USD rallied to session highs of 1.2195 after the ECB announcement that it would stick with its asset purchase plan. While inflation has accelerated, the ECB sees the effects as temporary and inflation will dip back below target later in the year.

The stronger US data that followed shortly after the ECB announcement give the dollar a push.

GBP-USD rallied from near one-month lows of 1.4073, seen in London morning trade, to a top of 1.4174 after the London close. The UK will release April and revised second quarter GDP data on Friday, alongside April industrial production and trade data.

Both the GDP and production data are expected to show strength. On the other hand, rising COVID cases may derail plans for the last stage of reopening scheduled for June 21.

USD-JPY rallied in the aftermath of the US CPI data, heading from near 109.45 into the open, and topping at 109. 80.

Yields initially moved higher on the data, which supported the dollar, though quickly reverted lower. The 10-year rate subsequently slipped from 1.53% to 1.47%., which took USD-JPY to session lows of 109.42.

USD-CAD was higher, lower, and then higher again through the morning session, initially rallying on the US CPI data, before falling back as Treasury yields slid lower. Fluctuating oil prices also drove the Canadian dollar lower before recovering in the afternoon.

https://dmarketforces.com/forex-dollar-fluctuates-as-u-s-inflation-rate-rises/