FX.co ★ 10.08.2022:Speculators anxious ahead of CPI report; JPY and NZD advance.USDX,USD/JPY,AUD/USD,NZD/USD

The US CPI index, which is due today, is one of the indicators tracked by the Fed for making monetary decisions. After a strong NFP report, high inflation figures are likely to force the central bank to hike rates more aggressively.

Almost all analysts are sure that inflation will accelerate. Besides, the report on labor costs released yesterday hinted at such a possibility. The cost of labor per unit of output came in at a high level of 10.8% after an increase of 12.7% in the first quarter. Persistent wage growth also boosts inflationary pressures.

US citizens are also not optimistic about economic prospects. Judging by the Economic Optimism Index published yesterday, this indicator is deep in the negative zone. A reading above 50% signals optimism. In August, it fell to 38.1% after the July figure of 38.5%. Moreover, the figure has been declining for the 12th month in a row as soaring inflation outpaces wage growth.

While traders are anticipating inflation data and stocks have fallen to the lowest levels in a week, the US dollar has recouped overnight losses. In the Asian session, it was consolidating around 106.19.

Apart from that, the greenback is up amid risks of global inflation, expectations of aggressive rate increases, and a probable sharp drop in the companies’ earnings.

US Treasury yields are growing thanks to the same fundamental factors, US government bonds are also considered safe-haven assets. Moreover, the yield curve is still inverted, which signals a recession. As a result, the market sentiment is getting more bearish.

China has extended military exercises. This decision has increased geopolitical tensions in the Asia-Pacific region.

This is why the appeal of the US currency as a safe-haven currency climbed considerably during the Asian session. The US dollar index is trading in the range of 106.16-106.40 versus its main rivals. Its trajectory largely depends on fresh macro stats.

Fundamental factors for the yen are also positive today. In Japan, the Producer Price Index decreased slightly to 8.6% from 9.4% in annual terms. It means that inflationary pressures are weakening. On top of that, the Ministry of Finance noted that it is important to closely monitor inflation. As a rule, verbal interventions of financial policymakers stimulate a rise in the yen. Today was no exception. The dollar/yen pair broke above 135 but a bit later it rolled back to 134.99. Perhaps some investors also chose the yen as a safe-haven asset. Given the US dollar consolidation, the pair is fluctuating in the price corridor of 134.86-135.30.

The Australian dollar is also climbing higher today following a decline in China’s CPI index. Besides, the Aussie rebounded from a July two-year low of 0.6975 amid rising prices for some metals. It partially occurred thanks to the US dollar. Having approached a high versus many counterparts, a strong greenback limited the fall in prices for industrial and precious metals, especially iron ore. The AUD/USD pair was trading in the bullish channel of 0.6947-0.6978.

Meanwhile, annual inflation in New Zealand jumped to a 32-year high of 7.3% in the second quarter. The meeting of the Reserve Bank of New Zealand will be held on August 17. There is no doubt that the regulator will raise the interest rate by another 50 basis points. So, the kiwi also gained momentum versus the US dollar today. The pair was trading in the range of 0.6276-0.6310. At the time of making the video, the kiwi rose sharply to 0.6309.