The July result was lower than expectations due to a sharp drop in the cost of petrol, causing markets to reposition on hopes that inflation was peaking.
The euro was at $1.0297 on Thursday morning, after jumping 0.84% the day before, its biggest daily percentage gain since mid-June. US shares and short dated treasuries also rallied on the news, which pushed the Nasdaq more than 20% above its June low and the two-year treasury yield down to 3.2141%, seven basis points lower than its previous close.Analysts at Standard Chartered said the decline in the dollar seemed to be driven by improvements in investors’ attitude to riskier assets – other than the move against the yen, which they said was more of a yield play.
“We suspect that many investors did not want to put on positions ahead of an important number that could have gone either way, so some of the post-CPI moves probably reflect delayed buying of risk-correlated positions.”