US Dollar Index reached three month highs after strong US CPI.
The US Dollar Index (DXY), which measures the strength of the US dollar against a basket of six major currencies, is trading at three-month highs, around 104.80, during the Asian session on Wednesday.
As US yields reached multi week highs, investors turned to the greenback.
Concurrently, US rates are hitting multi-week highs across the yield curve.trading near 104.80. Higher inflation may prevent the Fed from lowering interest rates in March.
There has been a major shift in market mood, with forecasts of an unchanged interest rate next month rising to 93%., in stark contrast to just a month ago.
Investors are now considering the prospect of a rate drop by the Fed in June.
Investors are now considering the prospect of a rate cut by the Federal Reserve (Fed) in June.
The unexpected upward surprise in US inflation for January has forced Commerzbank analysts to reconsider the plausibility of the Federal Reserve’s tilt toward interest rate decreases. Observers are wondering if the previously anticipated Fed interest rate drop for May will now be called into question.
In terms of the prognosis for May, it is advisable to wait for January’s Personal Consumption Expenditure (PCE) inflation statistics. And see if elevated price pressures hold into February before making any decisions about Fed policy adjustments.
In January, the US headline Consumer Price Index (CPI) reached 3.1%. Exceeding the expected 2.9% but somewhat less than the prior rate of 3.4%. Month on month, US inflation increased by 0.3%, contrary to expectations that it would remain at 0.2%.
The US Core CPI (YoY) remained constant at 3.9%. Surprising market forecasts for a decrease to 3.7% in January. Furthermore, US Core Inflation (MoM) rose by 0.4%, exceeding the predicted unchanged reading of 0.3% in January.
