Dollar Tumbles on Weaker Inflation Data

The U.S. stocks ended the session higher with the SPX500 rising for the fourth consecutive session. Investor's risk appetite improved following the news that the United States is seeking a new round of trade talks with China. On the other hand, softer inflation data accompanied by solid growth is good for stocks. The SPX 500 gained 0.5% to 2904, and the tech-heavy Nasdaq Composite rose 0.8% to 8013. The Dow Jones Industrial Average traded at a high of 26191, its highest level since early February. The index settled at 26145, its first close above 26000 this month.

The dollar index which measures the greenback against a basket of major currencies ended lower for the fourth consecutive day following weaker inflation data. The Core Consumer Price Index for August rose 0.1% versus an expectation of 0.2%. DXY tumbled to a six-week low of 94.43. On the other hand, the Central Bank of the Republic of Turkey (CBRT) raised interest rates to 24.00% from 17.75% which supported the emerging market's currencies against the dollar. The USDTRY traded at a two-week low of 6.0169, and the USDZAR dropped to a two-week low of 14.62. Market participants await the August retail sales figures later today.

The European Central Bank kept the monetary policy unchanged and lowered the macroeconomic projections. However, the upbeat tone of the president Mario Draghi boosted the single currency. The EURUSD rose to a two-week high of $1.1714 ahead of the European trading session.

The Bank of England left interest rates unchanged at 0.75% with a vote of 0-0-9 as expected. The bank raised the third quarter GDP estimate to 0.5% QoQ from 0.4% and declared that the ongoing tightening of monetary policy is appropriate. However, Carney addressed later the risks of a "no-deal" Brexit to the economy, and he said that it could be as bad as the "2008 financial crash." The GBPUSD rose to a six-week high of $1.3131, and the GBPJPY is hovering near the 147 level.

Gold prices rose to a two-week high of $1212 following the release of soft U.S. inflation data. Also, the silver ounce traded at a high of $14.34. However, metals reversed gains and closed in the red territory.

Oil prices slipped as the International Energy Agency declared that the global economic risks are mounting. The West Texas Intermediate crude futures fell by 2% to $68.78 per barrel, and the Brent futures lost 1.5% to $78.41 per barrel. The energy services firm Baker Hughes will report the U.S. oil rig count later today.

Major Economic Events

GMT Country Event Expectation Previous
10:00 UK BoE Gov Carney Speaks    
12:30 US Core Retail Sales (MoM) (Aug) 0.5% 0.6%
12:30 US Retail Sales (MoM) (Aug) 0.4% 0.5%
13:15 US Industrial Production (MoM) (Aug) 0.3% 0.1%
14:00 US Business Inventories (MoM) (Jul) 0.5% 0.1%
14:00 US Michigan Consumer Sentiment (Sep) 96.7 96.2
17:00 US U.S. Baker Hughes Oil Rig Count   860

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