DOLLAR FALLS AS CONSUMER PRICES GROWTH DISAPPOINTS
The dollar fell against its major peers after weak inflation data from the Bureau of Labor Statistics. The data showed that consumer prices rose by 0.2% in April. This was lower than the 0.3% traders were expecting. On an annual basis, the consumer prices rose by 2.5%, which was higher than the expected 2.4%. Core CPI, which excludes volatile products rose by 0.1% which was lower than the expected 0.2%. It rose at an annual rate of 2.1%, which was lower than the expected 2.2%. After the news, the US dollar index fell by almost 50 basis points. On a positive note, the number of people filing for initial jobless claims dropped to 211K, lower than the expected 219K.
Earlier today, the Reserve Bank of New Zealand announced its interest rate decision. Officials voted unanimously to leave rates unchanged at 1.75%. In the accompanying statement, the central bank said it would not raise interest rates in the foreseeable future. They blamed this on the historically low inflation rate, which is currently lower than the 2% target. They also blamed the ongoing global uncertainty on trade. Nonetheless, they are optimistic about the economy, which has created ‘unprecedented’ increase in employment.
In the UK, Bank of England left interest rates unchanged at 1.50%. This was an expected move because of a series of disappointing economic data from the region. This is coupled with the ongoing difficulties with Brexit. In the last quarter, officials blamed the weather for the 30 basis point miss in the economic growth forecasts. In the press conference, Governor Mark Carney reiterated his stance that they would increase rates once this year, and twice in the coming year.
After days of decline, the EUR/USD pair fell today following the release of weak inflation data from the US. The EUR/USD pair reversed the downward momentum and rose by almost a percentage point to reach an intraday high of 1.1936. The pair rose as investors lowered their expectations of the number of interest rates to be done this year from three to two. The pair’s RSI has reached 76, which means that the pair could reverse.
The kiwi fell today after the RBNZ removed chances of a rate hike this year. It reached an intraday low of 0.6900. As the day went on, the pair reversed, boosted by the weak US inflation data to reach an intraday high of 0.6965. The 25-day Moving Average has crossed the 50-day moving average, while the MACD indicator has turned bullish. This implies that the pair could continue going up and potentially test the 0.7000 level.
The pound rose earlier today to reach an intraday high of 1.3615 before erasing gains following a dovish statement from the BOE. The pair reached a low of 1.3488. In the past week, the pair has seen some major swings, mostly because of the Brexit situation. In the short term, traders can expect these swings to persist as Theresa May makes her final decision on the customs union issue.