We saw USD lose ground in the afternoon, following weaker-than-expected CPI and retail sales data out from the US. CPI came out below expectations at 0.3%, whilst the market had been forecasting 0.4%. The risk-on sentiment was exemplified by the S&P 500 reaching a record high in response.
Riskier currencies such as GBP had a boost in response, due to the correlation with equities. GBPUSD hit a 5-week high.
EURUSD reached a 7-week high yesterday. Flash GDP came out in the morning in line with the market’s expectations, at 0.3%. This had little impact on the FX markets. The drive for yesterday’s euro move against the dollar was dollar weakness.
After yesterday’s sharp moves in the markets in response to US inflation data, there is less significant data out today. GBPUSD and EURUSD have both hit resistance levels, so we may see profit taking this afternoon and a slight reverse to the recent move.
The ECB Financial Stability report is released at 9am, where the state of the financial system in Europe is assessed. Any risks highlighted may weigh on EUR.
Unemployment claims out of the US this afternoon are the most important piece of data today, however rarely have an impact on USD.
Any dovish remarks from FOMC members speaking today may contribute to further weakness to USD.
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