Forex Today: Dollar plunges on easing inflation

What you need to take care of on Thursday, August 11:

The greenback plummeted on the back of US inflation figures, ending the day in the red against all major rivals. The July Consumer Price Index contracted more than anticipated, down to 8.5% YoY from 9.1% in June. More relevantly, the core reading held steady at 5.9%, better than the uptick towards 6.1% anticipated.

Also, the Chinese Consumer Price Index rose by less than anticipated in July, up by 2.7% YoY from 2.5% in the previous month but below the 2.9% expected. In the same period, the Producer Price Index rose by 4.2%, well below the previous 6.1% and the expected 8%. Germany confirmed the July CPI at 7.5% YoY.

Stock markets soared with the news, as equities rallied on relief as easing US inflation should mean a less aggressive monetary tightening. Meanwhile, US government bond yields initially fell but quickly returned to pre-release levels, with the 10-year Treasury note currently yielding 2.78%.

US Federal Reserve officials hit the wires. On the one hand, Chicago Fed President Charles Evans said that he does not expect the Fed is finished with rate increases and that he expects the funds rate to top out at 4%. He also expects rates to rise this year and next. On the other,   Minneapolis Fed President Neel Kashkari noted that the idea of cutting interest rates early next year is unrealistic but warned that the country may enter into a recession in the near future.

The EUR/USD pair topped at 1.0368 and is now battling to retain the 1.0300 threshold. GBP/USD trades around 1.2220. Commodity-linked currencies were among the best performers amid soaring equities, with AUD/USD at 0.7080 and USD/CAD down to 1.2780.

Safe-haven currencies also appreciated against the greenback, with USD/CHF now changing hands at 0.9426 and USD/JPY trading at 132.90.

Gold was the worst performer, ending the day in the red at $1,789.30 a troy ounce. Crude oil prices benefited from Wall Street’s strength and recovered early losses. The barrel of WTI is currently at $91.60.

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