It’s Inflation Day for the Dollar

The U.S Producer Price Index fell by 0.1% on Thursday weighing on the Dollar as the markets continue to grapple with the outlook on monetary policy, the weakness in wholesale price inflation weighing on the Dollar just as it began to find support amidst the rising tension between Trump and North Korea.

Adding to the Dollar’s demise was weaker than expected jobless claims figures, with the upbeat sentiment from the JOLTs job openings numbers for June shaken.

It’s all about July’s inflation figures out of the U.S today, with the weak numbers on Thursday raising concerns over whether the FED will be willing to lift rates by the end of the year, the FOMC doves having been clear on the need to see inflation move towards the 2% target before being willing to make a move.

FOMC member focus on inflation has certainly raised the stakes ahead of this afternoon’s data out of the U.S.

Thursday’s figures suggest that today’s figures may be on the softer side, which could see the markets right-off a final rate hike for the year, which will be Dollar negative for the day.

At the time of the report, the Dollar Spot Index was up 0.09% at 93.488, recovering an the Asian session low of 93.312, with the real question being how far the Dollar can slide should today’s numbers disappoint, with FOMC members Kaplan and Kashkari scheduled to speak after the release of the data. Both are voting members of the Committee and there will be no guesses on Kashkari’s position, with the markets likely to be keen to get Kaplan’s outlook on rates through the remainder of the year.

With so much emphasis on today’s inflation figures, weak numbers will be of little relief to central banks looking for an easing in their respective currencies

It’s not just down to the stats however, as tension continues to build over North Korea, with neither side backing down and the prospects of war all the more heightened, as reflected in safe haven assets, with gold having closed out Thursday at a 2-month high, with riskier assets on the decline and Dow Futures pointing to further declines at the open as Asian markets continue to reel at the prospect of war in the region.

There are no material stats out of the UK today for the markets to consider, while the EUR will also be on the move as finalized July inflation numbers are scheduled for release.

The ECB has been quite clear on the area of focus, when it comes to inflation, with core inflation the key number for the markets to consider this morning. Prelim July core inflation number was better than expected last week, so the EUR will find support should the finalized figures be in line with or better than the prelims

At the time of the report, the EUR was down 0.17% against the Dollar at $1.1752, with the EUR aiming for $1.18 levels should Eurozone inflation figures impress and U.S numbers disappoint through the day.