The dollar rallied on Thursday after above-forecast U.S. PPI nL1N2YU2HX corroborated sizzling-hot CPI nL1N2YU10J the day before, lifting Fed rate hike expectations and ending the parity drama by pushing EUR/USD as low as 0.9952.
Risk aversion supported the dollar, even against the haven yen, though the U.S. currency trimmed its gains after Federal Reserve Governor Christopher Waller said he wouldn't support the 100bp hike that markets scrambled to price in after Wednesday's CPI report nL1N2YV1L5, unless further data favored it.
Waller added to the dollar retreat by saying a 75bp hike to 2.5% at the July 27 meeting would get rates to neutral, which caused a steep pullback in short-term rates, including a 16bp drop in 2-year Treasury yields from Thursday's highs.
initial jobless claims hit an eight-month high, but continued claims fell 41,000 and there were questions about how the July 4 holiday impacted results nL1N2YV145.
After rebounding from its low of 0.9952 on EBS, EUR/USD was still down 0.3%, beset by an 11-bp widening of 10-year BTP-bund yield spreads ahead of the July 21 ECB meeting and the highly anticipated anti-fragmentaion plan and after the Italian prime minister's resignation announcement nR1N2W600YnL1N2YV1PV.
A EUR/USD close below parity would encourage further selling and could see support in the 0.9500-9600 area tested nL1N2YV1A5.
USD/JPY was up 1% after making a new 24-year high at 139.38 on EBS, even before the U.S. PPI report took Treasury yields to Thursday's highs, as the divergence between increasingly robust Fed rate hikes and the static BOJ returned to the spotlight nL1N2YV1DO.
USD/JPY appears headed for resistance at 140 and 140.91 unless U.S. retail sales miss badly on Friday along with other measures of demand before the July 27 Fed meeting.
Sterling fell 0.47% amid global risk-off flows and demand for the haven and higher-yielding dollar.
Its fall was again caught by the descending lower 30-day Bolli by Thursday's 1.1761 low.
BoE rate hikes are seen peaking just above 3% around year-end and never closing the gap on Fed funds.
There's little major support between current cable prices and the 2020 pandemic trough at 1.1413 nL1N2YV1G1.
Despite bullish Australian jobs data nL1N2YV02L AUD/USD fell 0.5%, which was a strong showing versus the Canadian dollar's 1% dive, that even after the BOC's dramatic 100bp hike Wednesday.
USD/CNH was up 0.4% in what could be a broader upside breakout nL1N2YV15Z as China deals with COVID containment and lingering concerns about the property sector nL1N2YV077.
Friday features U.S. retail sales, Empire State manufacturing, industrial production and Michigan sentiment, as well as the Fed's quarterly Common Inflation Expectations Index.
For more click on FXBUZ