USD Softens Overnight Near 7-month High

USD

After holding on to much of last week’s gains yesterday, the U.S. dollar is softer against the majority of its counterparts this morning.  Disappointing New York manufacturing data and a lack of bullish comments from the Fed’s Stanley Fischer caused the greenback to cease its momentum.  As a result, odds that the Fed will raise rates this year were downgraded slightly to 67%.  Nevertheless, the Bloomberg Dollar Spot Index remains near a seven-month high.

This morning’s data may give the greenback some reprieve.  The cost of living in the U.S. rose at the fastest pace in five months, showing inflation is creeping up towards the Fed’s goal.  The consumer price index increased 0.3% in September from the previous month, matching expectations.  The year-over-year rise was 1.5%, the most since October 2014.

SEK

The Swedish krona often gets overlooked when analysts write about currency markets, but recent moves demand attention.  The Swedish krona has collapsed in recent weeks, touching a six year low against the Euro and the weakest level since early 2009 against the U.S. dollar.  The sell-off was accelerated by a weak inflation report.  However, move has bewildered Swedish officials.  Per Bolund, Sweden’s financial markets ministers has argued that “in some ways it’s surprising, when the Swedish economy is so strong.”   So far, however, the currency weakness has not been enough to drive inflation back to the Riksbank’s 2.0% target.

GBP

After touching fresh 31-year lows against the U.S. dollar yesterday, the British pound strongly bounced overnight.  The sterling found support after a report showed that annual consumer prices rose in September at the fastest pace in over 20 months.  The uptick in inflation may only lead to a brief advance for the sterling.  Indeed, more than 2/3rds of economists believe that the Bank of England will cut interest rates at their meeting in early November in an attempt to boost the flailing economy.  A rate hike would likely spark further inflationary pressures.  BoE Mark Carney has said he will tolerate faster price gains to boost the economy.  Rising consumer prices paired with rising import cost caused by the weak pound will surely put pressure on the U.K.’s middle class.