US inflation ticks lower
We saw a very modest downturn in the USD on the release of the US inflation data, which sees the annualised (year on year) rate down from 2.0% to 1.8% vs 1.9% expected. The core rate was 2.0% vs 2.1% forecast, so inflation is certainly easing off, but at these levels, it is little reason to get excited.
However, the USD has been under pressure, and we may see trading desks trying to push the greenback a little lower to test support levels lower down.
It seems the primary target could be EUR/USD, which snapped up to the highs around 1.1340 or so, though sellers will likely continue to try and cap the pair, causing yet another period of congestion which may or may not open up in the NY session later.
USD/JPY may try the downside and into the low 108.00's again, and a weaker stock market could prompt sellers here. US Treasury yields are looking softer again, but as long as the 10yr Note holds off 2.0%, then USD/JPY should find some support from this also.
Cable could also try to push up on the softer USD narrative, but as we have seen, despite repeated attempts and 1.2750-75, the spot rate cannot get near a test of the key 1.2800 level.