(Bloomberg) -- The dollar pared a drop as traders trimmed expectations of aggressive Fed rate cuts following a mixed US CPI report for July. The New Zealand dollar remains lower after the country’s central bank delivered a surprise rate cut.
- BBDXY is marginally lower amid short covering after being down as much as 0.2% to a four-month low; commodity currencies dip to fresh session lows after US data
- US 2-year yield is up 4 basis points at 3.97%
- Underlying US inflation eased for a fourth month on an annual basis in July, keeping the Fed on track to lower rates next month.
- “Markets may have jumped the gun and the Fed’s path forward is as they expected at the July meeting. Seeing YoY CPI below 3% is definitely refreshing, but it’s not the shock drop that would have triggered further USD selloff today,” according to Helen Given, FX trader from Monex
- EUR/USD is up 0.3% at 1.1029 versus session high of 1.1035, a level where EUR1.7b of call options expire Wednesday; 1.1054 is the YTD high set on Jan. 1
- USD/JPY up 0.3% at 147.31; it had dropped as much as 0.5% earlier as Japan’s Prime Minister Fumio Kishida said he won’t run for a second term as leader of the Liberal Democratic Party in September
- NZD/USD fell as much as 1.2% to 0.6003 after RBNZ Governor Adrian Orr said the committee considered a 50 basis point reduction, before settling on a 25 basis point cut.
- GBP/USD slipped 0.2% after data showing a slower-than-expected acceleration in UK inflation raised the possibility that the Bank of England may deliver 50bps of additional easing before the end of the year
Reporting by Robert Fullem and Matthew Burgess With assistance from Carter Johnson and Anya Andrianova.
