The relentless dollar rally came to a temporary halt yesterday as quarter end flows, falling US treasury yields, and a pull back in Oil prices combined to weaken the currency. Broader market sentiment was also lifted on news that senior Chinese officials are discussing a trip to Washington, that could lead to a Biden-Xi summit in November. Elsewhere German inflation data came in weaker than forecast, and US pending home sales also came in much lower than forecast.
Data released earlier this morning confirmed UK Q2 GDP growth grew y/y 0.2%, and in a further sign of a weakening eurozone economy, German retail sales data came in much weaker than forecast at -1.2% versus +0.5%.
* Daily move - against G10 rates at 7:30am, 29.09.23
** Indicative rates - interbank rates at 7:30am, 29.09.23
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All eyes today will be on the latest inflation data due out of the eurozone and the US. EU Core inflation is expected to fall back to 4.8% from the previous month’s y/y 5.3%, and US Core PCE (the Fed’s preferred measure of inflation) is also expected to register a dip to 3.9% from the previous month’s 4.2% reading. As we move into Q4, markets are likely to focus less on inflation and interest rates, and much more on weakening economic growth which should help the US dollar continue its upward trend.
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