Daily Afternoon Report 10.08.2017

The dollar trimmed gains against the other major currencies on Thursday, after the release of disappointing U.S. inflation and jobless claims data damped recent optimism over the strength of the economy.

The U.S. Commerce Department said producer price inflation and its core reading both unexpectedly declined last month.

In addition, the U.S. Department of Labor said initial jobless claims increased unexpectedly in the week ending August 5.

The reports came after a series of upbeat U.S. employment reports had fuelled expectations the Federal Reserve will stick to its plans for a third interest rate hike this year.

USDJPY slid 0.37% to 109.66, just off Wednesday’s two-month low of 109.56, while USDCHF rose 0.24% to 0.9662.

Both the yen and the Swiss franc lost some steam but remained supported as heightened tensions between the U.S. and North Korea have sparked a flight to safety.

North Korea’s state media said on Thursday that Pyongyang will develop a plan by mid-August to launch intermediate-range missiles at the U.S. territory of Guam.

The comments came after U.S. President Donald Trump said earlier in the week that North Korea would be “met with fire and fury” if it continued its threats.

The euro was little changed against the Swiss franc after losing 1.02% on Wednesday, marking the largest one day change since the Swiss National Bank shocked markets when it scrapped its currency peg with the euro in January 2015.

Elsewhere, EURUSD fell 0.20% at 1.1735, while GBPUSD held steady at 1.2995.

The pound was unfazed by data earlier showing that U.K. manufacturing production was unchanged in June, though industrial output registered a larger than expected increase.

The Australian dollar was almost unchanged, with AUDUSD at 0.7890, while NZDUSD tumbled 1.22% to 0.7277.

In a widely-expected move, the Reserve Bank of New Zealand left interest rates unchanged at 1.75% on Thursday, but added that it still expects inflation to rise gradually.

RBNZ Governor Graeme Wheeler said monetary policy would remain accommodative for a while and that the Kiwi had risen since the last monetary policy statement in May partly in response to a weaker U.S. dollar.

Wheeler added that a lower New Zealand dollar would help increase inflation and achieve more balanced growth.

Meanwhile, USDCAD held steady at 1.2697, erasing an earlier climb to a three-week high of 1.2735.

Statistics Canada reported on Thursday that the new housing price index rose 0.2% in June, confounding expectations for an uptick of 0.4%.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.12% at 93.53, off the session’s high but still close to the more than one-week peak of 93.77 hit on Wednesday.