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Dollar Gains On Inflation Data

Dollar Gains On Inflation Data

There was a mixed tone to investor sentiment on financial markets yesterday with the US Dollar holding a firmer tone following the release of US CPI data for June.

Both the headline CPI and core CPI increased by 0.9% in the month, almost double the 0.5% consensus forecast for each index.  The US currency strengthened on the back of the release, as the market interpreted the stronger print as increasing the chances the Fed may begin to taper QE sooner than expected.  

The Pound has risen to 20.30 versus the South African Rand – the highest since March of this year. This is on the back of violent scenes following the arrest of President Zuma. At least 72 people have died as the police have lost control and rioting, violence and looting is rife. President Ramaphosaha called it the worst violent spree since before apartheid ended in the early 1990’s. If the situation continues there are fears over food shortages. It looks unlikely that the Rand will bounce back whilst the situation remains so fraught.

The firmer Dollar tone is evidenced by EUR/USD starting today around the 1.1780. GBP/USD is operating in the bottom half of the 1.38 but is looking like it wants to push higher with GBP/EUR also on the ascendancy and eying up the 1.1745 region.

This morning, UK CPI for June has also printed above expectations with the only other release of note being Eurozone industrial production. This however, will unlikely cause much impact to the market.

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