Forex Today: Euro tumbles after ECB dovish rate hike; Oil and Wall Street edge higher

During the Asian session, the New Zealand Business PMI is due, along with Chinese data that includes Retail Sales and Industrial Production. Later in the day, Germany will report wholesale inflation, the Eurozone Labor Costs, and the Bank of England will release its inflation expectations report. In the US, data to be released includes the Empire State Manufacturing Index, Industrial Production, and the University of Michigan Consumer Confidence survey.

Here is what you need to know on Friday, September 15:

The US Dollar Index posted its highest daily close since March, above 105.30 on Thursday. US stocks rose, with the Dow Jones gaining 0.96% and the Nasdaq rising 0.81%.

Data from the US showed that the Producer Price Index increased by more than expected in August, with the annual rate rising from 0.8% to 1.6%. The Core annual rate slowed from 2.4% to 2.2%. Retail Sales rose 0.6% in August, surpassing expectations of a 0.2% increase. Initial Jobless Claims advanced from 217K to 220K, below the market consensus of 225K.

Overall, US data shows that the US economy remains resilient and that inflation rebounded in August. However, these numbers did not significantly alter Federal Reserve (Fed) monetary policy expectations. The Fed is widely expected to keep interest rates unchanged next week.

On Friday, data from the US includes the NY Empire State Manufacturing Index, Industrial Production, and the University of Michigan Consumer Confidence survey (September - preliminary).

The European Central Bank (ECB) raised its key interest rates by 25 basis points. However, it was seen as a dovish hike as it signaled that no further rate hikes are likely in the near future. Lagarde's statement offered no surprises and mentioned that some members preferred a pause at the September meeting. As a result, the Euro lost ground across the board after the statement.

Analysts at Commerzbank: 

Monetary policy is having an effect and is slowing growth, although the ECB experts still do not expect a recession. We assume that the central bankers will indeed not raise interest rates any further. At the same time, however, we still expect that the ECB will not lower interest rates next year as the underlying inflationary pressure remains too high.

EUR/USD resumed its downtrend, falling to the 1.0630 area. It posted the lowest daily close in months and remains under pressure. EUR/CHF suffered its worst day in months, dropping from weekly highs at 0.9600 to 0.9530, with a crucial support area between 0.9500 and 0.9520.

On Friday, Germany will report the Wholesale Price Index. The Eurogroup meets in Spain, and Eurostat will release Q2 Labor Costs and July trade data.

GBP/USD posted the first daily close below the 200-day Simple Moving Average since March around 1.2400. The Bank of England will release its inflation expectations survey on Friday. 

Risk appetite offered limited impetus to antipodean currencies. On Friday, China will report Industrial Production and Retail Sales, closely monitoring those numbers.

Despite positive Australian employment numbers, the AUD/USD failed to hold above 0.6450 and lost momentum during the American session.

NZD/USD reached weekly highs but then pulled back towards the 0.5900 area. It continues to move sideways with a slight bullish bias in the short term, although overall sentiment remains bearish.

The Loonie outperformed, helped by the extension of the rally in crude oil prices. The WTI barrel rose above $90.00, reaching its highest level since November. USD/CAD lost ground for the fifth consecutive day. It is hovering around 1.3500, and a consolidation below that level could open the doors to more losses.

Gold finished flat at $1,910 after testing the $1,900 area. Silver lost ground but ended at $22.60, far from the one-month low of $22.28.

---