Alexander Kuptsikevich
FxPro Financial Services Limited
US CPI data once again came in markedly above forecasts, reaching 5% y/y. The core inflation rate of 3.8% y/y is the highest since 1992. Most significantly, the monthly price growth rate remains well above the norm, reflecting high inflationary pressures in the US.
Fuel (+2.1% m/m and 50.1% y/y), transportation services (+1.5% m/m and 11.2% y/y) and used cars (+7.3% m/m and 29.7% y/y) have yet to run out of steam, while apparel prices (+1.2% m/m and 5.6% y/y) have already started to lift of.
We must not forget the experience of 1970 when individual group price spikes following each other triggered cumulative inflation the Fed was too slow to react to.
Interestingly, however, the initial market reaction was the opposite of the norm: USD came under pressure, and major equity indices rose. These purchases of risky assets could intensify further if the Fed's comments confirm the transitory nature of inflation. It is now worth keeping a close eye on developments on the US debt market, where rising yields promise to benefit the dollar.
Trade Responsibly. CFDs and Spread Betting are complex instruments and come with a high risk of losing money rapidly due to leverage. 77.37% of retail investor accounts lose money when trading CFDs and Spread Betting with this provider. The Analysts' opinions are for informational purposes only and should not be considered as a recommendation or trading advice.
Recommended Content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.