US Dollar Dips Lower After CPI Missed Forecast, Euro Firms

Market Reviews

Euro continues to strengthen versus US dollar, with the EUR/USD pair hovering near $1.16 level. Australian dollar and New Zealand dollar are the strongest ones, while US dollar and Japanese yen are weak. The greenback is also pressured by weak CPI data. Meanwhile, investors are cheering US CPI miss, as there’s hope for some stabilization and recovery in US stocks.

US Headline CPI slowed from 2.7% yoy to 2.3% yoy in September, missed expectation of 2.4% yoy. Core CPI was unchanged at 2.2% yoy, missed expectation of 2.3% yoy. Also from US, Initial jobless claims rose 7k to 214k in the week ended October 6, missed expectation of 205k. Continuing claims rose 4k to 1.66m in the week ended September 29.

On stock markets, DAX fell by 0.66%, CAC was down 1.43%, FTSE dropped by 1.31%. Earlier in Asia, Nikkei lost 3.89% to 22590.86. Singapore Strait Times fell by 2.69% to 3047.39. Hong Kong HSI fell by 3.54% to 25266.37. China Shanghai SSE dropped by 5.22%, to close at 2583.46. Italian 10 year yield is rising 0.055 at 3.559. German 10 year yield is down -0.035 at 0.522. German-Italian spread is hovering slightly above 300 handle.

The ECB said in the accounts of the September 13 meeting, that policymakers ultimately decided that the domestic economy was showing considerable resilience, so risks to growth remained balanced, even if some argued that the factors behind the recent slowdown may not be temporary. Policymakers also concluded that domestic cost pressures continued to build and broaden, indicating that inflation would rise, moving back towards the bank's target of almost 2% after undershooting it for over five years.

Some policymakers have warned that external risks, ranging from trade tensions to an emerging market shakeout and Brexit, could derail global growth. Still, the actual impact of trade tensions has been limited so far, even if there could still be an impact over time. Overall, the accounts of September ECB monetary policy meeting provide no surprise nor anything of particular importance.