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By xemarketanalysis February 14, 2018 3:11 pm
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    XE Market Analysis: Faster US Inflation Supports Rate Hike Concerns

    OVERVIEW

    • US CPI above forecast in January as yields rise.
    • USD rises on inflation data but then fell on Russia memo concerns.
    • SA Rand rises as ANC put pressure on President Zuma.
    • Japan's economy grew 0.1% in Q4, posting it as the longest continuous expansion since the 1980s. 
    • Eurozone Q4 GDP growth in line with expectations making industrial production stronger.

    HIGHLIGHT

    US inflation data for January came in above forecasts with core inflation posting its largest gain in a year adding to expectations that price pressures are building and further rate hikes will be needed. 

    US DOLLAR

    The Dollar is down on the day having gained over 0.5% percent versus its major counterparts following the inflation data that pushed government bond yields back to 4-year highs, indicating investors expect higher interest rates. However, weak retail sales for January, which fell 0.3% after December, were revised down to show a flat reading that appears to have caused a rethink over the strength of US consumer spending causing the Dollar to fall sharply.

    BRITISH POUND

    The Pound is marginally positive for the day after another volatile session saw it heading lower on Brexit concerns with the foreign minister and Brexiteer Boris Johnson giving a speech aimed at convincing those who voted to remain in the EU the benefits of leaving it.

    EURO

    The Euro has somewhat underperformed today given the solid Q4 economic data, potentially pointing to high market expectations. The Euro has swung back positive against the broadly weaker US Dollar, rallying over 1% from its session low.

    CANADIAN DOLLAR

    The Canadian Dollar has recovered 1% from a recent low against its US counterpart in a broad-based selloff that appears to be linked to US economic data that cast doubt over the health of the US consumer, and whether US inflation really is such a concern.  

    AUSTRALIAN DOLLAR

    The Australian Dollar has popped to a 1-week high versus the US Dollar as market sentiment turned positive in part due to a fall in the volatility index, driving investors back towards risk assets and currencies.

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