Price action in financial markets this morning suggests that no bad news surrounding geopolitical developments is viewed as good news by market participants, with global equities showcasing a decent
bid tone on the absence of any drastic overnight headlines from the geopolitical hotspots.  While there has been some progress on allowing the delivery of Russian humanitarian aid to Eastern Ukraine, the ceasefire in Gaza has been lengthened 24 hours, and the Kurdish forces in Iraq have successfully pushed back against the IS insurgents, closer to home things continue to spiral out of control as the protests in Ferguson, Missouri pick-up steam.  The introduction of the National Guard to help quell the protests has incited more angst towards law enforcement, with the protests now overflowing into St. Louis as the arrest toll from last night’s demonstrations reaches 31.  At this point any de-escalation (or lack of acceleration) in any of the trouble spots abroad will take precedent in dictating market action, which is one of the reasons equity futures are trading with a  positive tone ahead of the North American data releases this morning.
In an environment where the USD is trading firm against all the majors ahead of the US CPI numbers, the Aussie is the lone exception, which is gaining ground against the big dollar after the release of the minutes from the last policy meeting.  While the minutes didn’t drastically alter the language used in previous statements, the Reserve Bank of Australia noted an easing of financial conditions that lowered expectations of further accommodation from the central bank, reiterating rates are set to remain on hold.  AUDUSD is edging back to levels the pair was at before the drastic jobs numbers from two weeks ago sent the Aussie spiraling, though the ascent is much more gradual than the associated decline, with the pair edging back into the mid-0.93s.
Price action in Sterling this morning is the polar opposite of the Aussie, the worst performing major against the USD as the GBPUSD continues to display heightened volatility.  Looking like it was participating in the ALS Ice Bucket Challenge, the Pound’s rebound on the back of Mark Carney’s comments over the weekend had cold water poured on it, with GBPUSD shedding close to a full big figure after UK inflation numbers increased by less than forecast.  The speed of increase in the CPI basket dropped to only 1.6% on a y/o/y basis in July, falling short of the 1.8% that had been expected, and the 1.9% registered in June.  The unexpected slowing of inflation will allow Mr. Carney and the BoE a little more breathing room in terms of when the first rate hike for the economy will come, and likely takes away some of the threat for upward pressure on the Poundtomorrow should there be any dissents in the release of minutes from the last monetary policy meeting.  While dissents for a rate hike from some of the more hawkish board members on the MPC have been rumored, with inflation running well beneath the 2% mark, it is unlikely the dissents will carry much weight at this juncture.
Heading into the North American open, inflation figures for the US economy were also released, with the print coming in bang-on expectations with a core reading of 1.9% and the headline registering at 2.0% on a y/o/y basis.  While the CPI numbers did little to move the needle in terms of market action, the optimistic prints for Housing Starts and Building Permits both helped lend support to an already strong USD, as both came in better than forecasted and up from the June numbers where both had disappointed.  The Loonie is weaker against the big dollar this morning, with the losses increasing on the back of the better than expected US CPI .  USDCAD managed to hold above trend-line support yesterday, and is now trying to position itself above the 1.09 handle before the opening bell.  There are a few nearby resistance levels throughout the low-to-mid 1.09s that could constrain any further upward exuberance for the pair ahead of the FOMC minutestomorrow, though a close today above 1.09 would be constructive for further gains in the short-term.
Further reading:
USDCAD
New 9 month low for EUR/USD following US housing data
