Daily FX Trading Update: Risk Appetite Up on Chinese Inflation Reports

The US dollar returned some of its recent gains as traders booked profits off their positions on a pickup in risk appetite. Data from the US, namely initial jobless claims and import prices, turned out upbeat. US retail sales and PPI numbers are lined up for today and improvements are eyed. Headline retail sales could show a 0.6% gain while core retail sales could print a 0.4% increase. Headline PPI could show a 0.2% increase while core PPI could print a 0.1% uptick. The preliminary UoM consumer sentiment index is also due ahead of Fed head Yellen’s testimony.
The euro was able to chalk up a bit of recovery to the dollar but was weaker against the comdolls. Data from the euro zone came in line with expectations as the German final CPI stood at 0.1%. Only the euro zone trade balance is due today and a wider surplus of 20.5 billion EUR is eyed from the earlier 20.0 billion EUR.
The pound managed to make a quick bounce against its rivals on a bit of profit-taking but the UK currency still looked mostly weak. There were no reports out of the UK economy yesterday while the BOE credit conditions survey and UK construction output data are due today.
The franc took advantage of dollar weakness but was no match to the pickup in the pound, euro, and yen. There were no reports out of Switzerland yesterday while today has the PPI lined up. Analysts are expecting to see a 0.1% uptick in producer prices, up from the earlier 0.3% drop.
The yen gave up ground to most of its peers when risk appetite improved in the markets. Japan’s tertiary industry activity index was flat instead of showing the projected 0.2% drop. There are no reports due from the Japanese economy today.
Commodity Currencies (AUD, NZD, CAD)
The comdolls were off to a weak start after China printed a weak trade balance spurred by a sharp decline in exports and a surprise drop in imports. However, risk appetite picked up later in the day when US crude oil inventories revealed a large drop in production and triggered a bounce for crude oil. Chinese PPI and CPI numbers are due next.
To contact the reporter of the story: Samuel Rae at samuel@forexminute.com
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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.