US Dollar Dives Post Consumer Price Index Eyes Fed Outcome

US Dollar Dives Post Consumer Price Index Eyes Fed Outcome

By: Oliver Miller | Where To Trade | On:17-09-2014 08:43
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US Dollar Dives Post Consumer Price Index, Eyes Fed Outcome

Key Highlights

  • US dollar moved a bit lower as the US consumer price index released missed the forecast and registered a decline of 0.2% in August 2014.
  • US core consumer price index remained unchanged in August compared to the last month.
  • UK employment increased for May to July 2014 and the unemployment rate decreased to 6.2%.
  • GBPUSD and EURUSD pairs were seen trading higher, as the US dollar was sold after the US CPI release.

US Consumer Price Index

About an hour ago, the US consumer price index was released by the US Bureau of Labor statistics. The market was expecting the US CPI to remain flat in August 2014, compared to the same month of this year. However, the report mentioned that there was a decrease of 0.2% in the CPI in August 2014. When we consider the year-over-year change, then the US CPI rose by 1.7%, which is 0.2% less than the market expected and down from the previous reading of 2.0%. These figures were seasonally adjusted, and the most important part is that this was the first decrease in the CPI since April 2013.

The US Consumer Price Index (CPI) Ex Food & Energy was also released at the same time. It remained flat in August 2014 whereas over the last 12 months, the US core CPI increased by 1.7%, down from the previous reading of 1.9%. This was more on the disappointing side, as the report mentioned that this was the first time since October 2010 that the US core CPI did not increase.

So, one can say that there was a constant decline in the CPI during the last four months. This might increase a lot of pressure on the fed considering the fact that it is deviating from their target.

The EURUSD pair traded higher after the release and spiked towards the 1.2980 level, and once again failed to overtake the mentioned level. This is not at all good for the Euro buyers, as this number of failures to break a particular level could take the EURUSD pair lower. On the other hand, if the pair manages to climb above the 1.2980 level, then it might climb more than 50 pips towards the 1.3020-1.3050 area.

UK Employment Data

There was an important release in the UK during the London session today. The unemployment and claimant count change data was released by the National Statistics. The outcome was very encouraging, as the UK unemployment rate decreased more than the market’s expectation, and currently stands at 6.2%. The UK employment also increased in the reported quarter. So, overall the data should support the British pound in the short term.

The GBPUSD traded a touch higher after the release, but the pair lagged the momentum and bids to surge higher. There is a major resistance around the 1.6380-1.6400 area. The British pound buyers might eye a test of the mentioned level if the sentiment remains in favor of them moving ahead.

Oliver Miller

Oliver Miller

"Patience is the key for success"

Oliver Miller is one of the best financial analyst with 18 years of online trading experience

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