Dollar shrugs off weak inflation, China worries mount, cryptos rise

Optimism from weaker US inflation figures has made way to concerns about the US and also the Chinese economy, following weak data. Updated reads on UK and Canadian inflation and US industrial output are of interest. Cryptocurrencies have been marching higher while oil and gold have consolidated their gains.

Raging inflation debate: the US Core Consumer Price Index (Core PCI) missed estimates with 4% YoY initially sending the dollar down on hopes that the Federal Reserve delays tapering of its bond-buying scheme. While it convinced some that higher inflation was a result of rapid reopening and thus transitory others see its stagflationary – effects – a cooldown of the economy.

However, concerns about high stock valuations, covid and other factors resulted in another down day for shares, sending the safe-haven dollar back up – despite falling US Treasury yields. EUR/USD is hovering around 1.18 – dismissing upbeat comments from European Central Bank Christine Lagarde – AUD/USD is closer to 0.73 while gold is holding some of its gains around $1,800.

Chinese weakness: The world’s second-largest economy reported a disappointing 2.5% YoY increase in Retail Sales. Industrial output also missed with 5.3%, weighing on prices of some commodities. The Delta covid wave is taking its toll. Beijing’s ongoing crackdown on its tech companies, Evergrande’s financial troubles, and another North Korean missile launch all added to the damp mood.

UK CPI is set to leap from 2% to 2.9%, adding pressure on the Bank of England to raise interest rates. The UK and the EU remain at odds about the Northern Irish protocol. GBP/USD is trading back around 1.38 amid dollar strength.

UK Inflation Preview: Soaring prices may give sterling a shot in the arm, open door to rate hike

USD/CAD is trading around 1.27 ahead of Canada’s release of its inflation figures. WTI Crude Oil is holding onto gains, trading around $71 ahead of weekly inventory data.

Cryptocurrencies have been marching forward, with Bitcoin trading around $47,000 and Etehreum near $3,400. Ada is stable around $2.40 and Solana bounced from an earlier dip.

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