Softer-than-expected US March CPI data provokes US dollar sell-off

Stocks initially benefitted from softer-than-expected US March inflation data but then gave back their gains as core inflation remains stubbornly high, says Axel Rudolph, senior market analyst at online trading platform IG.

Initial stock rally gave way to selling pressure amid high core inflation

“Stock markets rallied on Wednesday, with several European indices such as the DAX 40 briefly trading in 1 1/4 year highs and the CAC 40 in all-time record highs ahead of the US March CPI release which came in lower than expected at 0.1% month-on-month and 5% year-on-year (YOY). US indices also rallied straight after the inflation report but rapidly gave back all of their gains as core inflation, excluding food and energy, came in as expected at 5.6% YOY versus 5.5% in February. They then made back some of their earlier gains ahead of the release of the FOMC minutes for the March meeting.”

US dollar takes a hit on soft US CPI data and hawkish ECB comments

“The US dollar slid back to its early April low on the back of softer-than-expected US inflation data with EUR/USD being one of the biggest benefactors as the cross rallied to the $1.10 mark and neared its February peak, boosted by hawkish comments from ECB governing council member and Austrian Central Bank chief Robert Holzmann. In a newspaper report he said that the inflation outlook alone would warrant another 50 basis point rate hike in May.”