The US dollar carried on with its rally, supported by stronger December Fed rate hike odds after seeing the upbeat headline CPI figure. The reading climbed from 0.1% to 0.4% versus the 0.3% consensus while the core version of the report came in line with expectations of a 0.2% uptick. Retail sales data is due next and the headline figure could show a 0.1% uptick while the core reading could come in at 0.5%.
The euro gave up some ground to its counterparts as traders flocked to the dollar, pound, and Swiss franc. There were no major reports out of the euro zone but its usual rivals drew more investor attention and led to some unwinding in long positions. Only the region’s trade balance is due today and a narrower surplus of 20.3 billion EUR is eyed.
The pound got a strong boost from a hawkish BOE statement, even though the central bank refrained from hiking in a 2-7 vote. Majority of members saw scope for reducing stimulus in the coming months, fueling expectations that a rate increase would happen before the end of the year. The central bank also projected that inflation could overshoot their 2% target and come in at 3% next month, supporting the case for tightening. Only the BOE Quarterly Bulletin and CB leading index are lined up today.
The franc enjoyed a bit of support after the SNB signaled that the franc was no longer as overvalued as it used to be. SNB head Jordan did reiterate that currency intervention remains an option but traders judged that it wasn’t such an urgent matter now that the euro is strengthening against the Swiss currency on taper expectations.
The yen regained some lost ground on rumors that North Korea is gearing up for another test of a missile, which might be an ICBM this time. Japan’s industrial production was kept unchanged at -0.8% as expected and there are no reports due from Japan today.
Commodity Currencies (AUD, NZD, CAD)
The comdolls were slightly lower for the day as risk-off vibes appeared to be creeping in. The Kiwi was the weakest of the bunch as it reacted the most to downbeat data from China. Australia printed stronger than expected jobs figures while the Loonie drew some support from oil price gains. New Zealand is set to print its Business NZ manufacturing index next.