The US dollar surged higher in recent FX trading as housing data came in much stronger than expected. Building permits jumped from 0.97M to 1.05M while housing starts climbed from 0.95M to 1.09M. CPI figures were mixed, as the headline report showed a 0.1% gain as expected while the core figure also printed a 0.1% uptick, lower than the estimated 0.2% increase. Crude oil inventories are due today but the bigger market-mover might be the FOMC minutes release, which could show more clues on how the Fed plans to adjust monetary policy later on.
The pound had a bloodbath in recent FX trading as the UK CPI figures turned out to be disappointing. The headline figure slipped from 1.9% to 1.6% instead of just dropping to the projected 1.8% reading while the core figure declined from 2.0% to 1.8%, lower than the estimated 1.9% reading. Underlying inflation reports were also weaker than expected, hinting that future CPI readings could be weighed down. For today, the BOE minutes might be more bearish for the pound as it would indicate why policymakers are less inclined to hike rates before the end of the year.
FX Trading Fundamental Analysis
The euro suffered a sharp FX trading selloff to the dollar yesterday when the euro zone current account balance fell short of expectations. The report showed a surplus of 13.1 billion EUR, lower than the estimated 19.3 billion EUR reading and the previous 19.8 billion EUR surplus. Only the German PPI is up for release today and this report might show a flat reading. Weaker than expected data could lead to more losses for the euro.
The franc gave up ground to the dollar despite the lack of top-tier data from Switzerland yesterday. Perhaps the Swiss currency took its cue from the euro or was simply defenseless against dollar strength. For today, there are still no reports lined up from Switzerland so the franc might be in for more weakness if FX trading sentiment does not change.
The yen was in a weak spot yesterday as risk appetite was up during the Asian FX trading session. There were no reports released from Japan though, leaving the yen vulnerable to risk sentiment. Japanese trade balance came in weaker than expected today, leading to a bit of yen selling. All industries activity index is up for release later on and another weak figure might lead to losses for the yen.
The comdolls were no match to dollar strength yesterday, as the Aussie, Loonie, and Kiwi gave up most of their recent gains. Data from New Zealand was weak, as inflation expectations were revised down from 2.4% to 2.2% while the pre-election fiscal update showed downgraded growth forecasts. In Australia, the RBA minutes provided a bit of support for the currency during the Asian session as the report was not as dovish as expected. Canadian wholesale sales is up for release later on and might show a 0.4% uptick.
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