The US Dollar Index struck a 1-month peak during London trade on Tuesday while higher risk currencies came under pressure. Analysts say that the markets' concerns over the rise in bond yields shifted sentiment away from riskier currencies and back toward the safe havens. The key concern is that as economies recover from the negative effects of the COVID-19 virus, and in conjunction with fiscal stimulus, inflation could surge. When the lockdown and quarantine restrictions are finally eased, consumer demand will fuel that inflation. Currencies, including the Aussie and Kiwi dollars, have come under pressure as a result. The New Zealand government's efforts to curtail the spread of the virus have been especially successful, with lockdown classifications easing regularly.
In London trade as of 11:06 am, the NZD/USD was trading lower at $0.7262, down 0.15%; the pair has ranged from a low of $0.72083 to a peak of $0.72856. The AUD/USD was higher at $0.7791, up 0.2303%, off the session peak of $0.77928. The USD/CAD was trading at C$1.2647, a gain of 0.03%, off the session high of C$1.26993.
EU Data Misses Forecasts
In the Eurozone, the German Statistics Office reported that retail sales in January were significantly lower on a year-on-year basis, far worse than analysts had expected. The reading came in at -8.7%, while analysts had predicted a slight decline to 1.2%; the previous reading of 1.5% was revised higher to 2.8%. The retail sales figures were also well below predictions on a month-on-month basis, coming in at -4.5%, while -1% had been expected. For the Eurozone, preliminary inflation data was released by Eurostat for the month of February. Core inflation was flat at 1.1% on an annualized basis, largely as expected, while CPI was flat at 0.9%, against an expected 1%. The EUR/USD was trading at $1.2031, down 0.20%.