Market Drivers – US Session – Wednesday August 10

The US dollar fell following the release of US inflation reading. The dollar ended the trading day in the red territory against all major rival currencies.

Safe-haven currencies edged higher against the US dollar, with USD/CHF now changing hands at 0.9426 and USD/JPY trading at 132.90.

Gold was the worst performer, ending the day in the red at $1,789.30 a troy ounce. Crude oil prices benefited from Wall Street’s strength and recovered early losses. The barrel of WTI is currently at $91.60.

Stock markets soared on the CPI news, as equities rallied on relief as easing US inflation should mean a less aggressive monetary tightening. Meanwhile, US government bond yields initially fell but quickly returned to pre-release levels, with the 10-year Treasury note currently yielding 2.78%.


Economic Data

July’s CPI in the United States contracted more than anticipated, down to 8.5% YoY from 9.1% in June. More relevantly, the core reading held steady at 5.9%, better than the uptick towards 6.1% anticipated.

The Chinese CPI rose by less than anticipated in July, up by 2.7% YoY from 2.5% in the previous month but below the 2.9% expected. In the same period, the Producer Price Index rose by 4.2%, well below the previous 6.1% and the expected 8%. Germany confirmed the July CPI at 7.5% YoY.

Other Developments

The EUR/USD pair topped at 1.0368 and is now battling to retain the 1.0300 threshold. GBP/USD trades around 1.2220. Commodity-linked currencies were among the best performers amid soaring equities, with AUD/USD at 0.7080 and USD/CAD down to 1.2780.

Chicago Fed President Charles Evans said that he does not expect the Fed is finished with rate increases and that he expects the funds rate to top out at 4%. He also expects rates to rise this year and next. On the other, Minneapolis Fed President Neel Kashkari noted that the idea of cutting interest rates early next year is unrealistic but warned that the country may enter into a recession in the near future.

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