US dollar retreats after US inflation data

US dollar drops as inflation numbers revive confidence

The US dollar gave back all its initial gains yesterday, finishing the day lower after a reliable US bond auction and higher inflation renewed confidence that the recovery remains on track. That spurred a restart of the great rotation with the dollar index failing ahead of 94.00 and falling 0.25% to 93.42.

Elsewhere amongst the major currencies, it was much the same story. The EUR, GBP, CHF, AUD and CAD all were recording modest gains versus the greenback. Taking a step back, most of the G-10 now appear to be stuck in range-trading mode. EUR/USD at 1.1810, has merely moved to the middle of its weekly range. It is much the same story for GBP/USD, which is at 1.3055 today. Either 1.1940 or 1.3200 would have to break on the upside to signal that a new US dollar retreat has started.

Major currencies look set to continue moving noisily within the August ranges for the remainder of the week, with the next big move on the US dollar still to be unveiled. Unfortunately, that means intra-day trading will likely be dominated by the intra-day FOMO brigade, with investors looking for facts to explain the moves. Unless the US employment data surprises, one way or the other, there is a strong case for moving to the side-lines for now.

New Zealand is in the focus of traders and investors this morning and for good reason. More community cases of Covid-19 in Auckland have been recorded. Auckland is in a partial shutdown to control the outbreak. The New Zealand government has already indicated that new cases reported outside of Auckland, the capital city, will result in a return to national movement restrictions. If New Zealand implements further restrictions, this move is likely to weigh on the New Zealand dollar, with New Zealand’s tentative recovery in grave danger, should the pandemic spread throughout the country.

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