Wednesday, 15 Jul 2009

Dollar Plunges Ahead of Core CPI Publication

The Dollar has plunged against a number of its most traded pairs ahead of the vital release of Core CPI data from the U.S. at 12:30 GMT. The CPI or Consumer Price Index measures the change in the price of goods and services that are purchased by consumers (excluding food and energy). The release is highly significant to the U.S. economy and the U.S. Dollar as it accounts for a majority of overall inflation in America. The previous figure was 0.1%. However, today's release is expected to be 0.2%.

The USD has declined against the British Pound by over 75 pips to the 1.6400 level. This is largely owed to the optimism in the global banking sector that followed the release of positive data, such as record profits of $3.44 billion for top U.S. bank Goldman Sachs. The EUR/USD pair is already trading higher by over 100 pips today at 1.4090, as equity markets in the Euro-Zone continue to rally for yet another day. The Dollar has also fallen sharply versus the CHF and Canadian Dollar thus far today.

Looking ahead to the Core CPI release, if the figure is higher than forecast, we may see the greenback erase its earlier losses. However, an equal to or a lower than forecast result may continue or at least stabilize the USD's bearish trend today. Other releases that are expected to affect the USD's bullishness today are more economic releases from the U.S., including the Industrial Production at 13:15 GMT and the FOMC Meeting Minutes at 18:00 GMT. It is also a wise idea to follow the Crude Oil Inventories at 14:30 GMT, as this is set to drive USD and Oil trading going into the end of the week.