The US dollar again enjoys demand after the yesterday's trading session. The currency mostly gets support from the escalation of the US-China trade conflict, which took the centre stage this week. After the threats crossover, the players are not highly interested in risk assets and choose US dollar for now. However, the greenback lacks a strong driver for the more stable upturn.
The market remains focused on the trade conflict, though it will have to give a glance at the economic reports to be released this Friday. Specifically, the US inflation data will arouse the main interest. The market still highly expects two more interest rate revisions, but with the observed trade war, the fears of the conflict consequences can turn the table, which naturally may affect the outlook and US Federal Reserve's stance.
As a result, it is very important that the inflation will be good or at least show that the economy is not affected by the duties so far, while domestic demand stays strong being a reason for further monetary normalization.
The euro-to-US dollar keeps fighting for the 1.16 handle and the decisive word tests with the US inflation figures. The break of the transitional support at 1.1575 will open the path to 1.1550 and further. The sterling hits the summer bottom at 1.2840. If the sterling-to-US dollar fails to recover above 1.29, the rate can plunge below 1.28.