USD Broadly Lower on CPI Data, Euro Steady After ECB Statement

Market Reviews

The decision of the Bank of England was not a surprise for the markets, so the pound remained virtually unchanged against the dollar after the decision of the Central Bank. The British central bank has left its monetary policy unchanged. The BoE’s Monetary Policy Committee voted unanimously to hold interest rate steady at 0.75%, after lifting it to the highest since 2009 last month. Asset purchase target was also unchanged at GBP 435B. The regulator also noted, that further rate increases are likely to be gradual and limited.

The euro remains steady after the ECB's Governing Council left rates at the same level. The single currency is trading as the second strongest one for today. ECB kept main refinancing rate unchanged at 0.00% as widely expected, the marginal lending facility and the deposit facility are kept at 0.25% and -0.40% respectively. The decisions of the ECB coincided with the expectations of analysts.

The European Central Bank lowered 2018 and 2019 growth forecasts but kept 2020 growth forecast unchanged. For 2018, growth is projected to be 2.0%, down from 2.1%. For 2019, growth is projected to be 1.8%, down from prior 1.9%. For 2020, growth is projected to be 1.7%, unchanged. Inflation forecasts were kept unchanged, at 1.7% in 2018, 2019 and 2020.

The US dollar fell after weak CPI data. Headline CPI rose 0.2% mom, 2.7% yoy versus expectation of 0.1% mom, 2.7% yoy. That slowed from prior month’s 0.2% mom, 2.9% yoy. Core CPI rose 0.1% mom, 2.2%, missed expectation of 0.2% mom, 2.4% yoy. Also it missed expectation of 0.2% mom, 2.4% yoy. Meanwhile, the US jobs report was positive. Initial jobless claims fell by 1k to 204k in the week ended September 8 (the new lowest level since December 6 1969). Continuing claims dropped by 15k to 1.696m (the lowest level since December 1, 1973).

Turkish Lira strengthens after the CBRT hikes policy rate from 17.75% to 24%. The currency has originally dropped on President Tayyip Erdogan’s comments against interest rate. The USD/TRY pair drops more than -3% after the release and is now set to take on 6.000 handle.

According to the joint survey by AmCham China and AmCham Shanghai, escalation of the US-China trade war significantly influence American companies working in China. Companies reported the tariffs were pressuring profits, reducing demand for their products and driving up production costs. More than 60% of US companies polled said the Trump’s trade tariffs were already affecting their business operations, while a similar percentage said tariffs by China on US goods were having an effect on business. Roughly three-in-four firms surveyed said duties on an additional $200 billion worth of Chinese goods would hurt business further, and close to 70% said additional retaliatory Chinese tariffs would be bad for business.