Dollar weakens ahead of CPI, energy costs back on the agenda
By Alun John and Brigid Riley
TOKYO/LONDON (Reuters) — The dollar slipped against most currencies on Thursday ahead of U.S. inflation data that will shape the Fed's policy direction, although the prospect of higher energy costs pushed it to a one-month high against the yen.
The euro rose 0.48% to $1.1028, the pound gained 0.4% to $1.2771, and the yen was steady at 143.83 per dollar, having earlier softened to 144.14 per dollar, its weakest in a month.
However, the main scheduled event of the day — and indeed the week — the release of U.S. CPI for July is yet to come.
The data will go some way towards underscoring or disrupting markets' current expectation that the Federal Reserve is finished with its tightening cycle.
Expectations are for headline inflation to pick up slightly to an annual 3.3%, while the core rate, which excludes the volatile food and energy segments, is forecast to rise 0.2% in July, for an annual gain of 4.8%.
«The market reckons it's got a good handle on CPI. It thinks: 'Yes the headline number will go up, but on base effects so the Fed won't mind and the core number is probably going to go down towards the target, so everything's going to be OK,'» said Jane Foley head of FX strategy at Rabobank.
«But even if the number comes out in line, there are a number of things for the market to be watching out for,» she said, pointing to recent volatility in the U.S. Treasury market and higher energy costs, which could filter through to inflation and cause central banks to keep hiking rates.
Oil is at multi-month peaks, and European benchmark gas prices hit a nearly two-month intraday high on Wednesday after news of possible strikes at Australian liquefied natural gas facilities, though retreated on
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