Whilst some are getting excited by the euro strength the story is really the dollar weakness being seen. Over the past three weeks, it’s the kiwi, Aussie, Canadian dollar and Swiss franc that have been leading the charge against the dollar on the majors, with sterling and the euro dragging behind. EURUSD itself stopped just short of the 1.15 area yesterday. Further dollar weakness is emerging at the start of the European session, with USDJPY taking the brunt of this. The bottom line is that a tightening from the Fed is now not the central scenario for markets for the remainder of the year and the recent noises rom Fed governors appears to be backing this up. Note that Bullard (on the hawkish side) speaks today, together with the more dovish Dudley. It’s probably worth keeping an ear on ECB speakers as well, given the recent moves we’ve seen in EURUSD and the move towards the 1.15 level.
The Aussie was knocked slightly on the back of the latest labour market data, but the weaker US dollar tone soon took hold to reverse the move towards the 0.73 area. The data showed the rate steady at 6.2%, with full time employment falling by 14k (although this series is inherently more volatile). For today, we have the release of CPI data in the US, which is of some interest given the continued disparity between the headline and core rates. The headline rate is seen moving back into negative territory (-0.1%), whilst the core rate (excluding food and energy) is seen steady at 1.8%.