EUR/USD reaches a weekly high at 1.1845 after US CPI data

EUR/USD advances slightly during the New York session, trading at 1.1822, up a modest 0.10% at the time of writing. Before American traders got to their desks earlier in the session, the common currency reached a new weekly high at 1.1845, though it retreated some of its gains, sitting above the Monday high.

The market sentiment is downbeat, with commodity-linked currencies losing against the greenback white US significant equity indices post losses between 0.17% and 0.72%.

US CPI figures lower than expected, caused a knee-jerk reaction

Across the pond, the US inflation numbers were released. The CPI on a monthly basis was 0.3%, a tick lower than the forecasted while excluding food and energy CPI shrank to 0.1% from 0.3% foreseen. On an annual basis figures, CPI remains unchanged at 5.3%, while the CPI excluding food and energy contracted from 4.3% in the previous reading to 4%. 

This set of data proves right Fed Chair Jerome Powell’s thesis that inflation will be “transitory”. Moreover, the retracement of the EUR/USD after reaching the weekly high could signal that investors still bet on the normalization of the monetary policy in the US, this meaning that the Fed could announce a bond tapering at the FOMC September’s meeting.

In the Eurozone economic docket, lower impact data was released. Spain’s HICP came at 3.3% year-over-year, in line with expectations, while the monthly basis was 0.4% higher than the -0.7% foreseen by economists. 

During the European session, the German Bundesbank President Jens Weidmann commented about the digital euro and the possible disruption of the banking sector. 

"A gradual approach might make sense given the risks involved – that means a digital euro with a specific set of features and the option to add further functionalities later," Weidmann told a conference.

Regarding monetary policy, Weidmann made no comments.

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