Exclusive: U.S. inflation and ECB meet on Thursday

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Exclusive: U.S. inflation and ECB meet on Thursday

Stocks trade ahead of inflation and ECB DXY at 90.107 EUR USD above $1.22 marked as vulnerable to inflation surprises on either side Graphic: World FX rates by Tom Westbrook SINGAPORE, June 9 - The dollar clung to a small bounce on Wednesday as traders looked to the upcoming U.S. inflation data and a European Central Bank meeting to gauge the global recovery and policymakers' thinking. Investors have piled up stakes against the dollar, but are growing nervous about whether the end of enormous monetary stimulus is near and worry that interest rate increases could end a 15 month dollar downtrend. Some think that tapering could be boosted, and the dollar compressed if U.S. inflation runs hotter than the 0.4% monthly clip as economists expect. The focus is on any signs of an imminent slowdown to the ECB's bond buying program. Both are due on Thursday and the anticipation has all but killed volatility in major currencies as traders assume a wait and see stance. The dollar was good in the Asian session at $1.2174, while the euro held steady at 109.42 Japanese yen at a rate of 109.42. Deutsche Bank's Currency Volatility Index hit its lowest level since February 2020 overnight. The Dollar Index is anchored at 90.107 US dollars. Markets need reassurance that the global economic recovery is not in danger from either dangerous strains of COVID, or from the Fed being forced to change tack much earlier than expected, said Societe Generale currency strategist Kit Juckes. The vaccines seem to work so far and while distribution was uneven it's still accelerating overall, he said. That's enough hope. Still, it means that risk assets need regular reassurance that the Fed isn't going to tighten sooner than expected by the Fed. And so we wait for Thursday's FOMC data, then the CPI tomorrow. The Australian and New Zealand dollars were heavily restricted in narrow bands, with the Aussie being at $0.7741, roughly the middle of the recent two month range, and the kiwi namely at $0.7197. Sterling has also stalled as doubt has crept in over whether rising cases of the coronavirus Delta variant in Britain could delay business re-opening plans scheduled for June 21. It was purchased from last $1.4155. BOC, ECB, CPI Chinese consumer and producer prices are due on Wednesday, with the latter recently fast increasing as factories pass on rising raw material prices. A global increase in value could signal more pressure for global supply chains. This week Canadian dollar traders were also on edge ahead of a central bank meeting on Wednesday. The Bank is expected to raise the rates but continue to tapering asset purchases, with any surprises on the size or speed likely to dampen the loonie. However, the week's main focus is on inflation and the ECB and traders see both events as potentially bringing risks on all sides. U.S. economists are forecasting a 0.4% rise in the headline and the big numbers - they're big numbers, said Commonwealth Bank of Australia Currency strategist Joe Capurso. I think they fall short of that, he said. That could drive up U.S. yields and bring the dollar with it, unless the figure spooked stock markets enough to drag safe-haven flows into the Dollar. The ECB is expected to reduce policy settings, but the euro is likely to be sensitive to changes in bank economic forecasts or any warning that the pace of bond buying could be held in months before they get hurt. The U.S. yuan was stable and over the weekend on Wednesday during the offshore trading at 6.4 per dollar level, as sweeping laws that were written to compete with China cleared the US Senate, dampening yuan bulls' recent enthusiasm. On Tuesday, it hit a three-week low that recovered on the market when signs of regulatory investor caution and institutional attention drove the sale. It was last purchased $32,914. DISA last U.S. Open Trade Pct Change YTD Pct Low Bid Previous Change Session Euro Dollar 1.2174 $1.217 Mrd02:00 (0.5737 0.44% 1.2117 SEC) Dollar National 1.2108 Dollar Japanese Forex market info from BOJ.

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