The Dollar Takes The Last Punch, But It’s Not Dead Yet
So, the USD had to finish the week down. It had been hanging around and trading in relatively tight ranges all week, waiting for Yellen to give it a push in whichever direction she wanted, but she didn´t want to take the risk.
Instead, the FED left it to the economic data to make the decision for them, which it actually did, today.
The Dollar might be sick but it´s not dead yet
Retail sales and CPI (consumer price index) disappointed again today. At least, inflation (CPI) turned back to flat from negative and core CPI posted a 0.1% gain for the month, because, retail sales declined for the 3rd month out of the last four.
Well, employment has increased and the job market has been getting tighter, but that´s not translating into higher wages as we have seen during all this time, which is because of automation. That´s what´s keeping the retail sales and inflation down, in my opinion, among some other less important factors.
So, the dollar lost about 70-80 pips across the board, apart from GBP/USD which climbed 120 pips higher.
But, it´s not over yet, the decline has stopped and the Buck has claimed some of its losses back. As I mentioned in the previous forex update, a positive surprise would have a bigger impact than a negative one because the market was sort of expecting negative numbers.
The FED on the other hand, made it clear that there´s no rate hike in September, so a negative report wouldn´t change anything relating monetary policy, while strong inflation report would probably make the FED think again and possibly eat their hats.
So, that´s the reason the Buck hasn´t fallen off a cliff. Now we´re trying to find a good place to buy USD/JPY and sell GBP/US, although the resilience of the GBP to climb higher is worrying.
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