CPI Underwhelms Again, U.S. Dollar Falls Further. North Korea a Nail Biter

 

USD 

The U.S. Dollar is losing ground based on inflationary data coming in lower than expected for the fourth month in a row. Consumer Price Index was expected to show a measly uptick of 0.2% but came in below at 0.1%. Once more, economic figures are causing the greenback to fall as they paint a picture of an economy not ready to take on further borrowing costs. The chances of an interest rate hike by the Fed at their December meeting dove to 33.6%. At the time of writing, the buck is down against all its major counterparts.

In addition, markets are still wondering how much the North Korean nuclear crisis will escalate. Equity indexes have already tumbled while naturally the safe-haven currencies and assets, such as gold, are on the rise. News this morning of a main Chinese publication, Global Times, asking the Chinese government to protect Kim Jong Un from being toppled by U.S. forces/allies do not make us feel great going into the weekend.
All kinds of scenarios are being discussed, but we hope the parties involved choose to negotiate before doing anything catastrophic. Shaky markets tend to favor the dollar, but this type of situation is unprecedented and highly worrisome.  

 

EUR  

The Euro continues to trade around its best level in over two years following the lack of positivity in U.S. figures. Meanwhile, CPI in Germany, France, and Spain met its precise estimates, solidifying the case for Euro appreciation. While the continent remains mostly in holiday mode for the month of August, we see few items in the horizon that could change the tide. We foresee current ranges sticking around until September.  

 

JPY  

The Japanese Yen is up 1.2% already in August and could add to its value in the upcoming weeks as the world resolves the North Korean nuclear issue while markets are affected in a negative way. Indeed, the safe-haven Yen benefits from the likelihood of conflict, but proximity to the nuclear threat may also change how traders view the currency if we get closer to aggression. We will keep a close eye on the news and seek guidance from any other developments.