Investors will be closely watching the April U.S consumer price index reading

• The dollar hovered near a two-decade high against major peers today in the Asian session
• Reading on inflation will provide a clue on how aggressive the Fed will be in tightening monetary policy
• The yen continued to get some respite from a pause in the rise in benchmark U.S Treasury yields

Forex market 

The dollar hovered near a two-decade high against major peers today, ahead of a key reading on inflation that should provide clues on how aggressive the Federal Reserve will be in tightening monetary policy. The dollar index, which measures the currency versus six rivals, slipped slightly to 103.81 but is still not far from the high of 104.49 reached at the start of the week for the first time since December 2002. 

The euro rose a touch to $1.05405 but has mostly traded sideways since plumbing a more than five-year low at $1.04695 at the end of last month. The yen continued to get some respite from a pause in the recent relentless rise in benchmark U.S. Treasury yields, trading little changed at 130.36 per dollar, after dipping to a more than the two-decade low of 131.35 on Monday. 

Economic Calendar

Investors will be closely watching the April U.S consumer price index reading later today for any sign’s inflation may be starting to cool, with expectations calling for an 8.1% annual increase compared with an 8.5% rise recorded in March. After the Fed raised its benchmark overnight interest rate by 50 basis points last week, the largest hike in 22 years, investors have been attempting to assess how aggressive the central bank will be. 

Markets are priced for another hike of at least 50 basis points at the central bank's June meeting. We remain of the view that the broad U.S dollar rise will continue as the Fed executes its 'super-tightening. Look for ongoing demand for (the dollar index) on dips, with 104 already being probed and still potential for a run towards 107 multi-weeks. 

What’s Hot in Forex, Commodities and Indices

The greenback has climbed nearly 9% this year amid an increasingly hawkish Fed, as inflation burned hotter than policymakers had expected. Commonwealth Bank of Australia also sees the risk tilted to further gains from here. The USD's reaction to the CPI will be asymmetrical in our view. A positive surprise will encourage markets to increase pricing for a 75-basis point increase in the Funds rate later in the year and support the USD.

Euro-EUR

The single currency steadied despite the dollar hovering near a two-decade high against major peers today. The euro rose a touch to $1.05405 but has mostly traded sideways since plumbing a more than five-year low at $1.04695 at the end of last month. The greenback has climbed nearly 9% this year amid an increasingly hawkish Fed. Overall, the EUR/USD traded with a low of 1.0469 and a high of 1.0563 before closing the day around 1.0497 in the New York session.

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Japanese Yen-JPY

The Japanese Yen continued to get some respite from a pause in the recent relentless rise in benchmark U.S Treasury yields after dipping to a more than the two-decade low of 131.35 on Monday. The Bank of Japan has no plan to allow long-term interest rates to move more widely around its 0% target to stem sharp falls in the yen. Overall, the USD/JPY traded with a low of 128.32 and a high of 131.23 before closing the day around 130.82 in the U.S session.

British Pound-GBP

The British Pound has shown itself to be weak yet again during yesterday’s trading session. Britain is on course to enter a technical recession in the second half of this year and faces a big hit to living standards from surging prices, an economic think-tank said today. The NIESR forecast gross domestic product will fall by 0.2% in the third quarter. Overall, the GBP/USD traded with a low of 1.2409 and a high of 1.2568 before closing the day at 1.2455 in the New York session.

CFD News: US Stock Markets

Canadian Dollar-CAD

The Canadian Dollar weakened to its lowest level in 18 months against its U.S counterpart yesterday as oil prices fell and recent volatility in global equity markets continued. Canada is a major producer of commodities, including oil, so the loonie tends to be sensitive to the outlook for the global economy. U.S. crude prices settled 3.2% lower. Overall, USD/CAD traded with a low of 1.2788 and a high of 1.2877 before closing the day at 1.2805 in the New York session.

Australian Dollar-AUD

The Australian Dollar tried to nudge higher as Chinese CPI came in at 2.1% year-over-year to the end of April against 1.8% forecast and March’s print of 1.5%. PPI came in at 8.0%, instead of 7.8% expected and 8.3% previously. This presents a conundrum for policymakers that are trying to stimulate growth while seeking to contain price pressures. Overall, AUD/USD traded with a low of 0.7358 and a high of 0.7416 before closing the day at 0.7410 in the New York session.

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Euro-Yen EUR/JPY

EUR/JPY is trading above 14, 50 and 100 days moving average. Fast stochastic is giving a bullish tone and MACD is also issuing a bullish stance. The Relative Strength Index is above 61 and lies above the neutral zone. In general, the pair has gained 1.25%.

Sterling-Yen GBP/JPY

Currently, GBP/JPY is trading above 14, 50 and 100 days moving average. Fast stochastic is issuing a bullish tone and MACD is also indicating a bullish stance. The Relative Strength Index is above 60 reading and lies above the neutral zone. On the whole, the pair has gained 1.16%.

Aussie-Yen AUD/JPY

Currently, the cross is trading above 14, 50 and 100 days moving average. Fast stochastic is giving a bullish tone and MACD is also indicating a bullish stance. The Relative Strength Index is above 76 reading and lies above the neutral region. In general, the pair has gained 1.45%.

Euro-Sterling EUR/GBP

This cross is currently trading above 14, 50 and below 100 days moving average. Fast stochastic is indicating a bullish tone and MACD is also issuing a bullish signal. The Relative Strength Index is above 53 and lies below the neutral region. Overall, the pair has gained 0.12%.

Sterling-Swiss GBP/CHF

This cross is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bearish stance and MACD is also indicating a bearish tone. The Relative Strength Index is above 45 and lies below the neutral region. In general, the pair has lost 0.42%.

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