According to the official release, US inflation rose 0.2%, while the core reading was up 0.1% in April both slightly below market expectations. Therefore, inflationary pressures are not considered enough to justify a fourth rate hike this year, giving markets the needed trigger for a due correction. While inflation remained brisk and above the Fed’s target on both headline and core CPI readings, USD has continued to pullback after running into resistance yesterday.
The US Dollar strength has been taking many by surprise over the past few weeks, pushing the EUR/USD in what was a strong down-ward channel, only to break after the CPI miss. Nonetheless, it would still be difficult for the pair to break the 1.2000 psychological level. A speech form ECB President Mario Draghi headlines an otherwise a slow European session.
The Bank of England went dovish on Thursday’s rate decision, kicking expectations for a rate hike out, for this year. Despite this overt dovishness, the net result has been another support test in GBP/USD as the pair moved down to test a key area of support again.
The US Dollar waffled against the Yen on Thursday after US CPI figures disappointed, and the Yen is beginning to price in a significant ceiling for the USD/JPY at the 110.00 major handle. Data for the remaining Friday sessions is a slim affair, though US trade data from the Export and Import Price Indexes dropping at 12:30 GMT. The indicators are low-impact, but with the continued lack of resolution from the US-China trade spat, eyes will be on any figures relating to foreign trade.
Oil prices have slightly dipped, easing from multi-year highs in the previous session on hopes that alternative supplies could replace a possible drop in Iranian exports from U.S. sanctions. The sanctions come amid an oil market that has been tightening due to strong demand, especially in Asia, and as top exporter Saudi Arabia and No.1 producer Russia have led efforts since 2017 to withhold oil supplies to prop up prices.
The yellow metal extended gains earlier today following US CPI data. The weaker than expected inflation reading pushed the US dollar to the downside and gold managed to peak at $1,322.80 the highest level since April 30. Afterward trimmed gains finding support above $1,315. Recently moved back to the upside and currently hovering slightly below $1,320 holding the bullish tone intact.