Greenback Falls After US CPI Data Disappoint

The Australian dollar rose sharply against the US dollar after the Australia Bureau of Statistics released employment numbers for August. The numbers showed that the participation rate rose to 65.7% from 65.6% in July. More than 44K people were employed during the month, which was higher than the expected 16K. In July, 3.9K people lost their jobs. The unemployment rate remained unchanged at 5.3%, which is the six-year low. Reacting to the jobs numbers, the minister of jobs and industrial relations said that the tightening labour market will likely lead to higher wages.

The Bank of England (BOE) officials voted unanimously to leave interest rates unchanged at 0.75%. In the accompanying statement, officials pledged to continue the gradual tightening of the monetary policy at a gentle rate provided there was a smooth transition to Brexit. The rates decision was no surprise to traders, who expect the BOE to leave rates unchanged for the rest of the year. In 2019, one or two rate hikes are expected depending on the outcome of Brexit negotiations. The central bank last raised rates in the August meeting. In the statement, officials warned against protectionist policies, which are gaining ground around the world. The bank also published a new broad survey of business leaders around the country. The survey found that most business leaders were nervous about the impact of Brexit on their sales. It also found that most consumer businesses had a good summer, boosted by good weather.

The Turkish Central bank was praised for raising interest rates by 625 basis points. It was forced to hike because of the runaway inflation that the country is experiencing. This decision led the Turkish Lira to jump by more than 5% against the US dollar. This year, the Turkish lira has fallen by more than 70% against the USD as the central bank has left interest rates low amidst rising inflation. This is a positive move for the Turkish economy and the European Union, which was the most affected in the Turkish turmoil.

The USD fell today after disappointing inflation numbers. The data showed that the CPI rose by 2.7%, which was lower than the expected 2.8%. This was the third consecutive decline in CPI. The CPI is a closely-watched measure of inflation. The core CPI, which excludes volatile products rose by an annualized rate of 2.2%, which was below the expected 2.4%. On a MoM basis, the CPI and core CPI rose by 0.2% and 0.1% respectively. This was below the expected gain of 0.3% and 0.2%. On a positive note, the initial and continuing jobless claims continued to decline. The initial jobless claims fell to 204K, which was lower than the expected 210K. The continuing jobless claims fell to 1,696K, which was better than the expected 1,710K.

The euro was little moved after the ECB decided to leave interest rates unchanged. This decision was expected by traders who were only interested on clarity. In the accompanying statement, the bank said that it will reduce the monthly asset purchases by half in October and end the purchases in December. The statement also showed that officials were slashing the growth forecast. They now expect the economy to expand by 2.0% this year and 1.8% in 2019. These were lower than the earlier projections of 2.1% and 1.9%. The inflation target was unchanged. In addition, in the press conference, Draghi said that the risks of protectionism and emerging markets had grown.

EUR/USD

The EUR/USD jumped after disappointing CPI numbers from the US. It is now trading at an intraday high of 1.1635. As the pair jumped, it moved above the symmetrical triangular pattern it had formed in the past few days as shown below. Therefore, there is a likelihood that the pair will continue moving higher, potentially to the 1.1720 level.

GBP/USD

The GBP/USD pair moved slightly higher than the USD after the BOE and US CPI releases. It reached an intraday high of 1.3090, which is also the 61.8% Fibonacci Retracement level. The current level is above the 21 and 14-EMA on the four-hour chart below. The Average Directional Index is at 34. There is a likelihood that the pair will continue moving higher after the hawkish statement from the BOE. If it does, it will likely test the 1.3200 level.

XAU/USD

The XAU/USD pair jumped after US CPI data announcement. This was a continuation of the strength in the price of gold that started in mid-August when the XAU/USD pair reached 1160.90. It is now trading at 1210, which is the highest level in almost two weeks. The price is along the upper Bollinger Band. As the USD weakens, the pair is likely to test the 1213.93 resistance level.