Dollar falls despite U.S. CPI data on drop in U.S. yields and rise in stocks


Although the greenback briefly gained in New York morning after better-than-expected U.S. inflation, dollar erased intra-day gains and ended lower against majority of its peers on Thursday due to fall in U.S. Treasury yields together with rise in U.S. stocks.  
  
Versus the Japanese yen, although dollar retreated from 109.67 in Asian open to 109.46 at European open, price briefly jumped to session highs of 109.79 in New York morning on higher-than-expected U.S. inflation data before weakening to 109.31 due to fall in U.S. Treasury yields and then moved sideways.  
  
The single currency went through a hectic session. Although price retreated from 1.2180 in Australia to 1.2154 in European morning, the pair rose to 1.2187 after ECB's unchanged interest rate decision before falling to 1.2152 at New York open after release of better-than-expected U.S. inflation data. Price then rallied to session highs of 1.2194 on cross-buying in euro but only to drop again to 1.2144. However, the pair then rebounded again to 1.2189 on return of risk sentiment due to rise in U.S. stocks before stabilising.  
  
Reuters reported at today's meeting, the Governing Council decided to confirm its very accommodative monetary policy stance: The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.50% respectively.     The Governing Council expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics.    They will also continue to conduct net asset purchases under the pandemic emergency purchase programme (PEPP) with a total envelope of 1,850 billion euros until at least the end of March 2022 and, in any case, until it judges that the coronavirus crisis phase is over.   
  
The British pound also went through a volatile session. Cable fell from 1.4125 in Asian morning to a 3-week low of 1.4074 in European morning on cross-selling in sterling, however, price erased intra-day losses and later rallied to session highs of 1.4178 near New York close on active buying in sterling.  
  
In other news, Reuters reported EU institution leaders will tell British Prime Minister Boris Johnson at the G7 summit that Britain and the EU had both agreed the protocol governing Northern Ireland trade arrangements and that Britain must apply it and not make unilateral changes.     European Commission president Ursula von der Leyen said on Thursday that the protocol was the "one and only solution" to avoid a hard border on the island of Ireland and that she still saw "fundamental gaps" in Britain's implementation of it.   
  
Data to be released on Friday :  
  
New Zealand manufacturing PMI, retail sales, Germany wholesale price index, UK GDP industrial output, manufacturing output, construction output, trade balance, NIESR GDP estimate, Canada capacity utilization, and U.S. University of Michigan sentiment.  

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