US dollar retreats after US inflation data

US dollar drops as inflation numbers revive confidence

The US dollar gave back all its initial gains yesterday, finishing the day lower after a reliable US bond auction and higher inflation renewed confidence that the recovery remains on track. That spurred a restart of the great rotation with the dollar index failing ahead of 94.00 and falling 0.25% to 93.42.

Elsewhere amongst the major currencies, it was much the same story. The EUR, GBP, CHF, AUD and CAD all were recording modest gains versus the greenback. Taking a step back, most of the G-10 now appear to be stuck in range-trading mode. EUR/USD at 1.1810, has merely moved to the middle of its weekly range. It is much the same story for GBP/USD, which is at 1.3055 today. Either 1.1940 or 1.3200 would have to break on the upside to signal that a new US dollar retreat has started.

Major currencies look set to continue moving noisily within the August ranges for the remainder of the week, with the next big move on the US dollar still to be unveiled. Unfortunately, that means intra-day trading will likely be dominated by the intra-day FOMO brigade, with investors looking for facts to explain the moves. Unless the US employment data surprises, one way or the other, there is a strong case for moving to the side-lines for now.

New Zealand is in the focus of traders and investors this morning and for good reason. More community cases of Covid-19 in Auckland have been recorded. Auckland is in a partial shutdown to control the outbreak. The New Zealand government has already indicated that new cases reported outside of Auckland, the capital city, will result in a return to national movement restrictions. If New Zealand implements further restrictions, this move is likely to weigh on the New Zealand dollar, with New Zealand’s tentative recovery in grave danger, should the pandemic spread throughout the country.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst - Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia and the New York Times. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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