The US dollar was mostly weaker in recent trading, only advancing against the British pound and Japanese yen. Data from the US economy was weaker than expected as the Empire State manufacturing index showed a surprise drop to industry contraction. US CPI, along with building permits and housing starts, are up for release today. Weaker inflation readings are eyed, following the disappointing PPI readings last Friday. Also lined up are the industrial production and capacity utilization data.
The euro took advantage of dollar weakness but was no match to comdoll strength. French and Italian banks were closed for the holiday so liquidity was lower for euro pairs yesterday. The German ZEW economic sentiment index is due today and a rise from -6.8 to +2.1 is expected, which would reflect a return to optimism. Meanwhile, the region’s ZEW index is slated to improve from -14.7 to -6.3.
The pound was still the weakest performer for the day as traders started pricing in expectations for the top-tier UK reports this week. The UK CPI is up for release today and no change in the 0.5% headline figure is eyed. The core reading is expected to dip from 1.4% to 1.3% with weaker than expected results likely to drive the UK currency lower.
The franc raked in more gains against its forex counterparts as Swiss PPI beat expectations. The report showed a 0.1% dip in producer prices versus the projected 0.2% decline. There are no reports due from the Swiss economy today so risk sentiment might have a bigger impact.
The yen held its ground despite seeing downbeat GDP data from Japan, as the lower-yielding currency was also supported by risk aversion in the Asian session. The economy posted a flat GDP reading for Q2 instead of the projected 0.2% expansion. There are no reports due from the Japanese economy today.
Commodity Currencies (AUD, NZD, CAD)
The comdolls were able to rally due to gains in gold and crude oil, but the event risks could turn things around. The RBA minutes are due today and indications of further rate cuts could mean losses for the Australian currency while New Zealand has its GDT auction, jobs data, and PPI readings lined up. Another strong gain in dairy prices, coupled with stronger than expected quarterly employment and producer prices gains, could lift the Kiwi while downbeat readings could spur rate cut expectations. Canada’s manufacturing sales data is also due but the currency could take its cue from crude oil.