Summary: 

• US CPI comes in below forecast at +0.1% M/M; USD takes a hit
• Stocks bounce but remain red for the week
• FOMC minutes and US retail sales economic events to watch next week
• USDJPY, EURAUD and GBPCAD 3 pairs to keep an eye on

Following a weak PPI release yesterday we got another disappointing inflation figure today – this time a more important CPI. While a miss has not been as large as in case of the PPI, it’s still a miss. Understandably the US dollar has been losing this week’s momentum and is now the weakest G10 currency on the market. 

Wall Street has opened in the green for the final trading session of the week as the market looks to recover some of the losses seen following the escalation of US and North Korean tensions earlier this week. Thursday’s session was characterised by a huge spike higher in the Volatility index (Vol.x on xStation) as the US30 experienced its largest daily drop since May. 

Summer is traditionally a calmer period for financial markets, with a lack of important data releases and many traders on holiday – however, it seems that politics and US President Donald Trump in particular has other ideas. His strong rhetoric directed toward North Korea has led to a sell-off in the markets as geopolitical tensions rise. Global indices fell, bonds rose and USDJPY tumbled in the aftermath of Trump’s speech. The latter has now broken below 110.00 not just from the president’s statements, but also because of US data. This means that the Fed will have a tough nut to crack over the coming months as the economic outlook has worsened, which forced traders to price-out the third rate hike this year. The FOMC minutes due on Wednesday could be a crucial moment for the US dollar as the document could confirm if the market is right.

Finally, let’s know turn our attention to technical analysis and 3 FX pairs that could well be worth keeping an eye on next time out: USDJPY, EURAUD and GBPCAD.