Talking Points:
- Neither the BOE nor the ECB changed policy today, but the hopeful tones employed gave room for the British Pound[1] and Euro[2] to rally.
- Weakness in the DXY[3] Index is threatening a break below the late-August swing lows near 94.43.
- Retail trader sentiment[4] has turned back to 'neutral' for the US Dollar, and is quickly moving in a 'bearish' direction.
See our longer-term forecasts for the US Dollar, Euro, British Pound and more with the DailyFX Trading Guides[5]
The US Dollar (via the DXY Index) has come under a good deal of pressure this week, threatening to post its fourth consecutive losing day and sixth out of seven overall. Economic data, central bank decisions, and global trade war tensions have all been at the forefront today, to the US Dollar's detriment.
This morning's release of the August US CPI report paved the way for US Dollar weakness, with both the headline and core inflation readings coming in below expectations. While rate expectations are still solid for next week's FOMC[6] meeting (Fed funds still pricing in >95% chance of a 25-bps hike), December odds have fallen slightly (80% yesterday to 74% today).
But central banks have been perhaps the biggest influencer today, more so than the 'high' rated US inflation report. Emerging markets have seen contagion fears ease after the Turkish central bank raised its key rate by 625-bps this morning to 24.00% in an attempt to arrest the Turkish Lira's decline. Stability in the Lira is good news for EUR/USD[7], given the European banking system's exposure to Turkish borrowers.
If the US Dollar, as
