How a mild PPI affects EUR/USD, GBP/USD, USD/CAD, and USD/JPY
The US dollar sank this week after inflation data came in lower than expected, reducing market confidence. The Producer Price Index (PPI) for May increased by only 0.1 percent instead of the projected 0.2 percent, and the Core PPI was likewise low. As a result, the dollar’s value declined relative to the majority of other major currencies. Traders in the United States and around the world quickly revised their perspectives, causing significant movements in key currency pairs.
The euro rises while the dollar falls
The euro surged beyond the 1.1550 barrier, something it hadn’t done in weeks. The poor US inflation report led investors to believe that the Federal Reserve would be reticent to hike rates in the future. Simultaneously, evidence of economic health in the Eurozone, such as figures on industrial output and consumer confidence, served to support the single currency. If the euro continues its upward trend, it might hit 1.17. Technical indicators such as RSI indicate that the market is overbought, thus a short-term pullback is still possible, even though the medium-term outlook remains favorable. To discover more about how PPI influences things, see the United States Bureau of Labor Statistics.
Sterling vs. Weak UK GDP
Even though the UK’s GDP declined by 0.3% in April, the British pound increased to roughly 1.36. Traders are more focused on the dollar’s collapse than on local data, which is why this spike is occurring. People may also be keeping the pound strong in the hope that the Bank of England would maintain its hawkish stance to contain inflation. If the next labor market data is better than predicted, a break above the 1.3640 resistance level could lead to a further advance to 1.3750.
The Canadian currency strengthens as commodities prices rise
As demand for commodity-related currencies increased, the USD/CAD slipped below 1.36. The loonie strengthened significantly as oil prices increased and the Bank of Canada kept the door open for tighter monetary policy. If crude oil maintains above $80 per barrel and Canadian economic data, such as housing starts and jobs, remains solid, the pair may continue to fall. Check out the IEA’s most recent oil report to see how the oil market has changed and how this affects the CAD.
Yen rises while Treasury yields fall
The Japanese yen strengthened again as U.S. Treasury yields declined, with the 10-year yield hovering around 4.35 percent. The USD/JPY pair tested support at 143.50. If it falls below this level, it may approach the psychologically significant 140.00 zone. The Bank of Japan remains in charge of the yield curve, and inflation in Japan is gradually growing. As a result, market participants are closely monitoring any regulatory changes in Tokyo.