Forex Daily Recap – Higher Probability of Rate Cut with Missed CPI Estimates

USD Index

The Greenback had slipped from 97.16 levels on last Friday amid poor May Non-Farm Payrolls and Average Earnings data. Until today, the US Dollar Index remained stuck below 97 levels. The US Consumer Price Index (CPI) data release was the key highlight for Wednesday, which came out at around 12:30 GMT. Market participants were eagerly waiting for these significant reports as the outcome would strengthen the Fed’s rate cut possibilities. Street analysts had expected the May YoY CPI that excluded Food & Energy to remain in-line with the previous 2.1%. Anyhow, the data came out 0.1% lower than the market expectation, reporting 2.0% this time. The May MoM CPI excluding Food & Energy also missed estimates. In the middle of such weak reports, MoM CPI came in-line with the consensus estimation of around 0.1%. Meantime, the May CPI Core recorded 0.11% higher than the previous 261.735 figures.

On an overall basis, the May CPI data showcased mixed reports. Fed Chairman Powell had earlier mentioned that the Bank would take up appropriate steps in case of an economic slowdown. Hence, the mixed CPI data would pressurize the Central Bank to make a rate cut happen sooner. On the other side, the US-China trade dispute continued to damage world businesses. Trump and Xi would meet up in the G20 Meeting about to happen by month end to discuss trade settlements. Coming back to USD Index’s performance, the Greenback marked the weekly low near 96.59 levels following CPI data release. Despite that, the Index took an immediate pickup and knocked off 96.80 levels. The Market seems to remain fingers crossed awaiting a near-by Fed rate cut.

EUR/USD

After starting trading on Wednesday near 1.1329 levels, the pair seemed to remain negative as the day approached closing. The Fiber had displayed a slowly phased uptrend in the Asian session marking day’s high near 1.1343 levels. The slight early upliftment had occurred on the backdrop of mixed Euro-specific data release. The France Q1 QoQ Non-Farm Payrolls came out 0.2% higher than the market hopes of around 0.3%. Also, Spanish May HICP and CPI data reported in-line with the consensus estimates.

ECB President Mario Draghi commented today that Central and Eastern Europe remains vulnerable to the trade war headwinds. Draghi’s warnings left the Fiber traders unnerved and kept the pair plunging. Later the day, ECB’s Coeure mentioned that the Bank’s  Asset Purchase Programme (APP) was a good source of financial easing. At around 16:50 GMT, the EUR/USD pair was testing the healthy 1.1291 resistance levels, marking daily low.

USD/CAD

The Loonie pair was trading 0.21% up in the late European session amid mixed CPI data and lowered Crude prices. The US CPI figures reported lower-than-expected while the CPI Core data revealed some bullish numbers. Meanwhile, the commodity prices reduced from $52.31 bbl, reaching $51.60 bbl after the release of disappointing EIA reports. The Market had expected a -0.481 million this time. Somehow, the actual reports showed up as 2.206 million showing lack of demand for the commodity. Hence, the USD/CAD pair maintained good growth today, quoting the day’s high near 1.1316 levels.

USD/CNY

The Yuan pair marked the day’s opening near 6.9098 levels buckling up for some descent upliftments. The Chinese May CPI and PPI data came out in-line with the market expectations elevating USD/CNY pair. The YoY CPI reported near 2.7% higher than the previous 2.5%. Meanwhile, the MoM CPI recorded 0.0% over the last 0.1%. The USD/CNY pair touched 6.9222 levels marking day’s high following early morning Chinese data. Laterwards, in the rest of the Asian session, the pair appeared giving up the accumulated gains reaching 6.9132 levels.

However, the pair took a U-turn after the release of lower-than-expected May YoY M2 Money Supply data. In addition to that, the Chinese May New Loans recorded 1,180 billion over 1,225 billion forecasts. Anyhow, this time, the pair could lift itself only till 6.9214 levels. When the mixed US CPI figures came out, the pair seemed to drop 0.02% reaching 6.9168 levels.