Eurozone, US inflation data to ramp up market volatility

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Following Thursday’s choppy action, major currency pairs are holding steady early Friday as investors gear up for key data releases.

Eurostat will publish the Harmonised Index of Consumer Prices (HICP) and the US Bureau of Economic Analysis will release the Personal Consumption Expenditures (PCE) Price Index for May, which is set to steady as the Fed rate cut for September hangs in the balance.

First-quarter Gross Domestic Product (GDP) data from Canada will also be watched closely by investors.

Although safe-haven flows continued to dominate the financial markets on Thursday, the Dollar struggled to gather strength against its rivals as US Treasury bond yields corrected lower. After rising 0.5% on Wednesday, the dollar’s DXY Index fell 0.35% on Thursday before settling slightly below 105.00 early Friday.

During Asian trading, the data from China showed that the NBS Manufacturing PMI declined to 49.5 in May from 50.4 in April. In the same period, NBS Non-Manufacturing PMI ticked down to 51.1 from 51.2.

These readings failed to trigger an immediate reaction, with the AUDUSD trading marginally higher on the day at 0.6640.

Retail Sales in Germany declined 1.2% on a monthly basis in April, Destatis reported early Friday. This print followed the 2.6% expansion recorded in March and came in weaker than the market expectation for a 0.1% decline.

EURUSD largely ignored this data and was last seen fluctuating in a tight channel above 1.0800.

After rising sharply on Wednesday, USDCAD turned south and closed the day in negative territory below 1.3700 on Thursday. The pair continues to edge lower toward 1.3650 in European trading on Friday. Canada’s real GDP is forecast to expand at an annual rate of 2.2%.

USDJPY lost more than 0.5% on Thursday and seems to have entered a consolidation phase at around 157.00 early Friday. The data from Japan showed that the Tokyo Consumer Price Index climbed to 2.2% on a yearly basis in May from 1.8% in April.

GBPUSD staged a rebound on Thursday and closed above 1.2700. The pair remains relatively quiet, moving up and down in a narrow band at around 1.2720 Friday morning.

Gold benefited from the pullback seen in US Treasury bond yields and registered small gains on Thursday. XAUUSD struggles to gather bullish momentum and is trading near mid-$2,340s.

(Source: OANDA)