USD Awaits Friday’s Key Inflation Report

On Friday, the Greenback was little changed vs. its major peers on geopolitical tensions between the North Korea and the United States following the U.S. President Donald Trump warning against attacking Guam or U.S. allies. On the economic data front, the U.S. producer prices unexpectedly declined in July, recording their biggest fall in about a year. The Labor Department said its producer price index for final demand fell as much as 0.1% in July edged down by reducing costs for services.

On the economic calendar for Friday, traders are awaiting Consumer Price Index for July, which measures the change in the price of goods and services from the perspective of the consumer. It is a key way to measure changes in purchasing trends and inflation. Consensus expectations put the CPI at 1.8% year-over-year. In addition, the markets are awaiting the U.S. Friday's key inflation report as it may signal a turnaround in the Greenback’s weakness this year.

  • The U.S. dollar index (DXY), which measures the Greenback against a basket of currencies, was steady at 93.49.

The common currency did not advance all that much after the French industrial production came out at a 1.1% drop against an anticipated 0.6%. However, the Italian trade balance did beat forecasts. The Greenback was steady vs. the single currency, with EUR/USD at 1.1757. On the economic data front, we have the Final CPI readings from Germany and France due in today, so better than predicted estimates could give the shared currency a little boost.

The economic reports from the United Kingdom yesterday came in as predicted with a slightly larger goods trade balance and the industrial production report beating expectations. Traders seem to continue to believe that in spite of the uncertainly around Brexit, the economy continues to be resilient. In the absence of any UK data today, this sentiment may drive the currency today.

The yen continued to show strength as it took the greenback’s safe heaven flows. On the data front, core machinery orders saw a worse than anticipated drop of 1.9% while PPI rose from 2.2% to 2.6%, thereby keeping positive inflation predictions supportive of yen gains. The markets are closed in Japan for a holiday today and consequently no reports are due.

Gold prices settled after hitting their highest levels in more than two months as rising tensions between Washington and the Pyongyang triggered safe-haven buying. The yellow metal is now trading at around $1,291.80. On the data front, investors are awaiting the U.S. Friday's key inflation report as it could provide more clues about the pace of the U.S. economy.

In the short term, gold prices could hit new highs due the tensions between the United States and North Korea’s nuclear program and also due the lack of political willingness by the Trump government to move forward on the economic agenda.

Earlier today, Oil prices declined weighed down by persistent oversupply concerns despite a bigger-than-expected decline in U.S. crude stockpiles.

Light Sweet Crude Oil Futures settled at $51.62, down 28 cents, or -0.58%, while U.S. West Texas Intermediate fell as much as 66% or 32 cents, to settle at $48.27, touching the lowest since July 26.

The most important economic events:

  • USD Consumer Price Index (YoY) (JUL): (GMT 12:30) – Important – Forecast (1.8%) – Previous (1.6%).
  • Consumer Price Index Ex Food & Energy (YoY) (JUL): (GMT 12:30) – Important – Forecast (1.7%) – Previous (1.7%).
  • USD Baker Hughes U.S. Rig Count (AUG 11): (GMT 17:00) – Medium.

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