PPI

Until the FOMC decision on Wednesday, USD/JPY seems like it may be in waiting mode.

Although PPI was lower than March's reading, it did little to soothe investor fears of rising interest rates.

Today’s PPI report suggests that inflation at a consumer level is likely to get worse before it gets better...

Although the print is very high, a single economic data point is unlikely to sway the Fed’s decision.

Headline US PPI for January was 9.7% YoY vs 9.1% YoY expected.

December CPI and PPI both came in hotter than expected, yet the US Dollar moved lower after the releases.

This week brings a plethora of data from the UK to use as a re-starting point.

Data over the next week from Sweden will be important in determining the direction of USD/SEK.

The US Dollar was mostly unchanged versus other currencies on the release of the minutes

With three central bank meetings on the schedule today (see my colleague Fawad Razaqzada’s reports from earlier today for previews and recaps of the BOE, ECB, and CBRT meetings) , FX traders have been understandably focused away from the world’s reserve currency. However, dollar bulls who were keyed in on this week’s inflation data were no doubt disappointed.

The second trading week of the new year began with some optimism that the US dollar might be able to stage a comeback after starting the year on a weak note. But circumstances have conspired in the latter half of this week to bring the dollar back down near year-to-date lows, extending the greenback’s pronounced weakness that prevailed throughout much of 2017.

The UK economy scored a hat-trick of good news this week. The purchasing managers' indices (PMIs) for the key sectors all strengthened above forecasts in April. We had already seen this week that the manufacturing sector PMI had risen sharply to 57.3 from 54.2 previously and construction PMI to 53.1 from 52.2. The key question was how the dominant services sector performed amid the Brexit uncertainty and ahead of the general elections in June. Well, apparently, very well. The PMI came in at 55.8, up from 55.0 and above 54.6 expected. The pound recovered from earlier losses to hit the $1.29 handle again, where it was trading around at the time of this writing.

Markets have predictably calmed down this afternoon as European traders clock out and US traders enjoy their President’s Day holidays, giving us a good opportunity to reevaluate the prospects for the world’s most widely-traded currency pair, EUR/USD.