Anticipations of a new rate hike in the United States before the end of the year were scaled back on Friday further to the release of weaker-than-expected inflation data. Although U.S. Federal Reserve Chair Janet Yellen has in the past ignored an absence of inflationary pressure and maintained her hawkish tone, markets estimate that the likelihood of any new tightening in 2017 is now less than 30%.
The result was not surprisingly a plunging greenback, albeit not without some blips, as markets had to deal with U.S. President Donald Trump’s dramatic tweets regarding North Korea. The USD appears stuck between its status as a safe haven and that of a gauge of U.S. economic activity. Fears of a nuclear conflict are calming, however, as senior U.S. national security officials have stated that such an outcome is not imminent.
After it was announced last week that Chinese exports had declined, that country has added more concerning news this morning, with data showing that industrial production and retail sales are lagging.
Stéphane Goulet
Range of the day: 1.2655-1.2760