Sign up to create alerts for Instruments,
Economic Events and content by followed authors
Free Sign Up Already have an account? Sign In
Quotes
All Instrument Types
- All Instrument Types
- Indices
- Equities
- ETFs
- Funds
- Commodities
- Currencies
- Crypto
- Bonds
- Certificates
Please try another search
Investors lost 37% by missing this ONE signal 😵
Read now
FX: It's All About Inflation Tomorrow
au.investing.com/analysis/fx-its-all-about-inflation-tomorrow-200467313
FX: It's All About Inflation Tomorrow
By Kathy Lien | May 19, 2021 06:03 Weaker U.S. data is finally catching up to the U.S. dollar. The greenback traded lower against all of the major currencies on Tuesday following softer housing data. Building permits grew 0.3% in the month of April, down from 1.7% in March, while housing starts dropped 9.5%. While housing demand is still very strong, the cost of raw materials like lumber have skyrocketed in recent months. In the 12 months to April, lumber prices rose more than 89%. Between weak job growth, the decline in spending, a slowdown in manufacturing activity in the New York region and now housing, it was only a matter of time before the U.S. dollar sold off across the board as these reports reinforce the Federal Reserve’s reluctance to respond to rising price pressures. At a time when the global recovery is gaining momentum, the U.S. dollar should underperform.
The euro rose to its strongest level in nearly three months against the U.S. dollar. As we mentioned in yesterday’s note, the relaxation of lockdown restrictions across Europe will revive demand for euros. The February swing high of 1.2243 is the closest level of resistance, and we think it will break easily, with EUR/USD making a run for 1.23. GBP/USD also closed in on three-month highs. The job market in the UK is hot, with 84,000 new workers added in the month of February. The claimant count also fell 15,000 and the unemployment rate dipped to 4.8% from 4.9%. Although average earnings growth including bonuses slowed to 4% from 4.5%, excluding bonuses wage growth accelerated.
Inflation will be the main focus for the next 24 hours, with consumer price reports scheduled for release from New Zealand, the UK, the Eurozone and Canada. With the exception of the euro area, where final numbers are anticipated, all countries are expected to report sharply higher price pressures, which could provide near-term boosts for their currencies. In fact, the New Zealand dollar was one of the day’s best performing currencies. No economic reports were released outside of dairy prices, which fell sharply. An uptick in PPI could renew talk of tightening by the RBNZ, which is already concerned about house prices.
The Canadian dollar rose to its strongest level in six years versus the greenback despite lower oil prices. According to the IVEY PMI report, prices in Canada rose sharply last month. The Bank of Canada was one of the first central banks to taper asset purchases and tomorrow’s inflation report is widely expected to validate its move.
Related Articles
US Dollar Under Pressure Ahead of CPI This Week - Soft Print to Fuel...
By Günay Caymaz - Mar 10, 2025
The US dollar fell last week due to Trump's inconsistent trade policies and signs of a slowing economy. February's non-farm payroll data disappointed, with unemployment...
US Dollar Struggles Ahead of NFP—Why EUR/USD Dips Are a Buy
By Chris Turner - Mar 07, 2025
This week's FX price action has been dominated by two stories: the re-rating of the euro (EUR/USD) on the back of looser fiscal and tighter monetary policy expectations and the...
Is US Dollar Topping Pattern Pointing to Broader Concerns?
By Chris Kimble - Mar 07, 2025
The US Dollar Index rallied sharply into inauguration day. Since then, it’s been very weak. Could things get worse for King Dollar? Today, we share a “weekly” chart highlighting a...
FX: It's All About Inflation Tomorrow
Add Chart to Comment
Confirm Block
Are you sure you want to block %USER_NAME%?
By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.
%USER_NAME% was successfully added to your Block List
Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.
Report this comment
I feel that this comment is:
Comment flagged
Thank You!
Your report has been sent to our moderators for review
Add a Comment
We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.