Dollar rallies broadly after U.S. inflation exceeds forecast: Sept 19, 2016

Market Review - 17/09/2016 02:05GMT 

Dollar rallies broadly after U.S. inflation exceeds forecast

The greenback rallied across the board on Friday after the release of better-than-expected U.S. inflation data increased speculation that the Federal Reserve may act to hike its rates later this year.

In a report, the U.S. Commerce Department said that consumer prices gained 0.2% in August from a month earlier, compared to expectations for a 0.1% gain and a flat reading in the previous month. Year-over-year, consumer prices increased 1.1%, above expectations for a gain of 1.0% and after having risen 0.8% in July.

Versus the Japanese yen, although the greenback rebounded from Australian low at 101.75 to 102.13 in Asia, price retreated again to 101.77 in European morning. However, price pared its losses and rallied to 102.29 in New York morning on dollar's broad-based strength and later climbed to session highs of 102.46.

The single currency moved narrowly initially in subdued Asian morning and weakened to 1.1220 in European morning. Intra-day decline accelerated after the release of U.S. inflation and euro tumbled to 1.1149 ahead of New York close.  

The British pound remained under pressure in Asia after initial short-covering rebound to 1.3247 in Australia and dropped to 1.3191 in early European morning on cross-selling of sterling vs euro. Cable tumbled in New York morning on dollar's broad-based strength and later fell to a 4-week low of 1.2996 on renewed Brexit concern. 

In other news, BoE's Forbes said 'sterling depreciation since EU exit vote is leading to some automatic adjustments in the UK current account balance; sterling depreciation since Brexit vote shud improve UK net foreign asset position by over 20% of GDP; improvement in UK net international asset position shud alleviate investor concerns.' 

Data to be release:

Eurozone current account and U.S. housing market index on Monday. 

Australia house price index, Swiss exports, imports, trade balance, Germany producer prices, U.S. building permits, housing starts and Redbook index on Tuesday. 

Japan exports, imports, trade balance, interest rate decision, U.K. public sector net borrowing, U.S. mortgage applications, interest rate decision and Canada wholesale sales on Wednesday. 

New Zealand interest rate decision, France business climate, Eurozone consumer confidence, U.K. CBI industrial trends survey, U.S. national activity index, initial jobless claims, monthly home price, existing home sales, leading index and KC Fed manufacturing index on Thursday.

Japan manufacturing PMI, France GDP, manufacturing PMI, service PMI, manufacturing PMI, service PMI, Germany manufacturing PMI, service PMI, Eurozone manufacturing PMI, service PMI, Canada CPI, retail sales and U.S. manufacturing PMI on Friday.