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US Dollar May Extend Recovery on Firm CPI Report

TALKING POINTS – US DOLLAR, CPI, FED, POWELL, NEW ZEALAND DOLLAR

  • Tame European data docket puts US CPI data in the spotlight
  • Upbeat print echoing firm wage growth may boost US Dollar
  • NZ Dollar led commodity FX higher in risk-on APAC session

A tame offering on the European economic data front puts December’s US CPI data firmly in the spotlight. The core inflation rate is expected to register at 2.2 on-year, unchanged from the prior month and broadly in line with near-term trend averages.

The precipitous drop in Fed rate hike bets in recent months may be hard to justify given such an outcome. Indeed, in asserting the US central bank’s data-dependent strategy, Chair Powell pointedly stressed that a multitude of would-be headwinds (trade wars, shaky European politics) have yet to show up in statistics.

With that in mind, an in-line result may well boost the US Dollar. An upside surprise echoing the unexpectedly strong wage inflation reading unveiled in last week’s official labor market figures might understandably amplify any such recovery.

NZ DOLLAR LED COMMODITY FX GAINS IN APAC TRADE

The Greenback corrected lower in Asia Pacific trade, retracing some of yesterday’s Fed-inspired gains. The sentiment-geared commodity bloc currencies outperformed as regional shares followed Wall Street upward, with the New Zealand Dollar leading the way higher to hit the highest level in three weeks.

See our market forecasts to learn what will drive currencies, commodities and stocks in Q1!

ASIA PACIFIC TRADING SESSION

Asia Pacific Trade Economic Calendar

EUROPEAN TRADING SESSION

Europe Trade Economic Calendar

** All times listed in GMT. See the full economic calendar here.

FX TRADING RESOURCES

— Written by Ilya Spivak, Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter

Source: dailyfx.com