Forex Today: UK inflation data support Pound Sterling, US Dollar consolidates before Fedspeak

Source Fxstreet

Here is what you need to know on Wednesday, April 17:

The US Dollar holds steady against its major rivals after ending Tuesday on a bullish note. The US economic docket will not offer any high-impact data releases but several Federal Reserve (Fed) policymakers will be delivering speeches on Wednesday. Eurostat will release revisions to March inflation data during the European trading hours.

US Dollar price this week

The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Australian Dollar.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   0.21% -0.05% 0.42% 0.84% 0.80% 0.65% -0.20%
EUR -0.21%   -0.27% 0.22% 0.63% 0.60% 0.45% -0.43%
GBP 0.05% 0.27%   0.49% 0.92% 0.86% 0.71% -0.17%
CAD -0.43% -0.22% -0.49%   0.41% 0.38% 0.22% -0.64%
AUD -0.83% -0.63% -0.90% -0.40%   -0.02% -0.18% -1.04%
JPY -0.79% -0.59% -0.84% -0.38% 0.03%   -0.13% -1.03%
NZD -0.64% -0.43% -0.71% -0.21% 0.20% 0.17%   -0.86%
CHF 0.21% 0.42% 0.16% 0.64% 1.04% 1.01% 0.85%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

 

The UK's Office for National Statistics reported early Wednesday that annual inflation, as measured by the change in the Consumer Price Index (CPI), edged lower to 3.2% in March from 3.4% in February. Additionally, core CPI rose 4.2% in the same period. Both of these readings came in above analysts' estimates and helped Pound Sterling gather strength. After spending the Asian session in a tight channel slightly above 1.2400, GBP/USD gained traction and rose toward 1.2450.

UK CPI inflation cools down to 3.2% in March vs. 3.1% estimate.

Hawkish comments from Fed officials and the cautious market stance helped the USD find demand in the American session and the USD Index closed the fifth consecutive day in positive territory on Tuesday. Early Wednesday, the benchmark 10-year US Treasury bond yield moves sideways above 4.65% and US stock index futures trade marginally lower. Israel said that it will retaliate against Iran and a war cabinet meeting to decide on the appropriate response will be reportedly held on Wednesday.

EUR/USD recovered modestly after falling toward 1.0600 on Tuesday and closed the day virtually unchanged. The pair stays relatively quiet and moves up and down in a narrow band above 1.0600 in the European morning.

Gold failed to make a decisive move in either direction on Tuesday as rising US Treasury bond yields made it difficult for the precious metal to benefit from the cautious market mood. XAU/USD continues to move sideways above $2,370 early Wednesday.

Gold Price Forecast: XAU/USD remains steady above $2,350 amid market caution.

The data from New Zealand showed in the early Asian session on Wednesday that the CPI rose 4% on a yearly basis in the first quarter, down sharply from the 4.7% increase recorded in the previous quarter. On a quarterly basis, the CPI was up 0.6%. NZD/USD stretched higher after this report and was last seen trading in positive territory slightly above 0.5900.

USD/JPY touched a yet another multi-decade high near 154.80 on Tuesday. The pair retreated slightly in the Asian session and seems to have stabilized at around 154.50.

Central banks FAQs

Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.

A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.

A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.

Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.

 

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
October hike odds climb toward 60% as Goldman and BofA both flip — what Warsh's "dose of accommodation" really changedRate futures now price roughly 55% to 62% for a 25bp hike at the October 27-28 FOMC, up from about 30% before Chair Warsh's post-meeting framing that the Fed is merely "removing some accommodation." Goldman Sachs has added an October hike to its forecast and Bank of America now sees moves in both October and December. Here is the repricing, the language behind it, and the two data points that decide it.
Author  Irene Q.
Sep 23, Wed
Rate futures now price roughly 55% to 62% for a 25bp hike at the October 27-28 FOMC, up from about 30% before Chair Warsh's post-meeting framing that the Fed is merely "removing some accommodation." Goldman Sachs has added an October hike to its forecast and Bank of America now sees moves in both October and December. Here is the repricing, the language behind it, and the two data points that decide it.
placeholder
Four jobs reports in five days: what JOLTS, ADP, claims and the September payrolls mean for the October Fed decisionThe US labour market faces its densest data week of the month. JOLTS job openings land Tuesday (7.2 million expected), ADP on Wednesday (70,000 expected), initial claims on Thursday and the September non-farm payrolls on Friday (100,000 expected, down from 162,000). Markets price a 64%-70% chance of another quarter-point Fed hike on October 28. The dollar index sits at 100.77 and the S&P 500 at 7,729.8.
Author  Mitrade
Sep 28, Mon
The US labour market faces its densest data week of the month. JOLTS job openings land Tuesday (7.2 million expected), ADP on Wednesday (70,000 expected), initial claims on Thursday and the September non-farm payrolls on Friday (100,000 expected, down from 162,000). Markets price a 64%-70% chance of another quarter-point Fed hike on October 28. The dollar index sits at 100.77 and the S&P 500 at 7,729.8.
placeholder
Nvidia's $150 billion buyback landed — and the AI sector fell anyway. That's the signal worth tradingNvidia closed up 1.68% at $228.86 on 28 September after announcing a $150 billion share repurchase authorisation, the largest single corporate buyback on record, while the rest of the AI complex sold off: AMD -3.6%, Micron -2.6%, Meta -4.8% and the Philadelphia Semiconductor Index -1.61%. The divergence is not noise. Capital is rotating toward cash-flow certainty, not abandoning the AI theme. With Micron reporting after the close on 30 September, here is what the split means.
Author  Irene Q.
Sep 29, Tue
Nvidia closed up 1.68% at $228.86 on 28 September after announcing a $150 billion share repurchase authorisation, the largest single corporate buyback on record, while the rest of the AI complex sold off: AMD -3.6%, Micron -2.6%, Meta -4.8% and the Philadelphia Semiconductor Index -1.61%. The divergence is not noise. Capital is rotating toward cash-flow certainty, not abandoning the AI theme. With Micron reporting after the close on 30 September, here is what the split means.
placeholder
【Daily Brief】30-year Treasury tops 5.59%, S&P 500 slips to 7,670 and gold holds $4,180 — PCE lands tonightThe 30-year Treasury yield closed at 5.59%, its highest since June 2002, and the Dow fell 131.59 points to 51,349.92. US consumer confidence dropped to 81.9, a 12-year low, and JOLTS job openings fell to 7.1 million. August PCE and Q3 GDP both land at 8:30am ET tonight.
Author  Suzie
Sep 30, Wed
The 30-year Treasury yield closed at 5.59%, its highest since June 2002, and the Dow fell 131.59 points to 51,349.92. US consumer confidence dropped to 81.9, a 12-year low, and JOLTS job openings fell to 7.1 million. August PCE and Q3 GDP both land at 8:30am ET tonight.
placeholder
Gold falls to near $4,150 as higher Treasury yields, oil prices outweigh softer PCE inflationGold price (XAU/USD) tumbles to near $4,150 during the early Asian session on Thursday, pressured by elevated US Treasury bond yields. Traders await the US September employment data for fresh impetus, which will be released later on Friday. 
Author  FXStreet
Yesterday 01: 26
Gold price (XAU/USD) tumbles to near $4,150 during the early Asian session on Thursday, pressured by elevated US Treasury bond yields. Traders await the US September employment data for fresh impetus, which will be released later on Friday. 
goTop
quote