Article Highlights

  • US CPI: 0.1% vs. 0.2% expected, 0.3% previous
  • US core CPI: 0.1% vs. 0.2% expected and previous
  • EIA crude oil inventories jumps by 2.6M barrels vs. 700K decline expected
  • Fed meeting minutes: some members need more data before raising rates
  • Dollar falls across the board
  • Oil hits six-year lows while gold recovers
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Geronimooooo!!! Forex traders sold the dollar like a hot potato yesterday thanks to a less-hawkish-than-expected FOMC minutes. What did the report say anyway?

The dollar started the U.S. trading session on the wrong side of the charts as Uncle Sam printed its CPI reports. Consumer prices only inched 0.1% higher in July when market players had been expecting 0.2% upticks for both the headline and core readings. Still, the numbers aren’t half bad considering the huge decline in oil prices.

What spurred dollar bears into Hulk Smash mode was the FOMC meeting minutes. The report was leaked a couple of minutes early and showed that while one member was already willing to raise rates, the others believe that rate hike conditions have still not been met.

More specifically, Fed members are worried that the economy’s slow growth and low inflation are not as temporary as they projected. Not only that, but they also said that “poor economic performance abroad continues to place limits on recovery.” As a result, Janet Yellen and her gang are still on a wait-and-see more for more signs of recovery before they pull the trigger on their rate hike plans. Looks like market players were right to associate China’s economic woes to the Fed’s rate hike schedule!

Not surprisingly, the dollar was sold off like there’s no tomorrow. EUR/USD jumped by 88 pips (+0.80%) to 1.1128 while USD/JPY dropped by 57 pips (-0.46%) to 123.79. USD/CHF was also notable with its 92-pip plunge (-0.95%) to .9647.

Even the comdolls caught a few quick pips against the Greenback. AUD/USD inched 11 pips higher (+0.15%) to .7354 while NZD/USD also saw a 34-pip increase (+0.52%) to .6609. Of course, it might have helped that gold prices recovered a bit on the back of risk aversion in the earlier trading sessions and that the Kiwi was supported by a decent dairy auction and Russia lifting its ban on dairy goods.

The Loonie was also under the spotlight after a weekly US oil stockpiles report came out larger-than-expected. This added to concerns of oil oversupply and pushed Brent crude oil down 3.4% to $47.16 per barrel, its lowest since March 2009. Yikes!

USD/CAD hit an intraday high of 1.3177 before settling back down to 1.3106 after the FOMC minutes. Meanwhile, CAD/JPY plunged by 65 pips (-0.68%) to 94.45 throughout the session as EUR/CAD rocketed by 151 pips (+1.05%) to 1.4585.

Asian session forex traders don’t have much to consider today, so you might want to watch out for possible continuation of yesterday’s price action. Also look out for possible retracement in case some dollar bulls choose to concentrate on the hawkish aspects of the minutes than focus on the Fed members’ immediate concerns.

Good luck and good trading!

See also:

London Session Recap

Forex Calendar

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