Mitrade Insights is dedicated to providing investors with rich, timely and most valuable financial information to help investors grasp the market situation and find timely trading opportunities.
    2021
    Best News & Analysis Provider
    FxDailyInfo
    2022
    Best Forex Educational Resources Global
    International Business Magazine

    US: Surprisingly high inflation can hurt USD if monetary policy is perceived to be too dovish – Commerzbank

    Source Fxstreet
    Jan 12, 2024 11:37

    What does Thursday's US inflation data tell us? Ulrich Leuchtmann, Head of FX and Commodity Research at Commerzbank, analyzes why USD exchange rates did not make huge jumps after the data was released.

    Where is the USD euphoria?

    US consumer prices rose 0.3% in December from November on a seasonally adjusted basis. The median estimate of analysts was for a 0.2% increase. The core rate was 0.3% vs. November, in line with the median estimate. This was not a massive shock, but a small deviation from the analyst consensus, hardly significant.

    Shouldn't we have expected more USD euphoria? After all, this result calls into question the image of a Fed that (a) will soon have room to cut rates and (b) will use it boldly. Well, with his recent very dovish comments at the December FOMC press conference, Fed Chairman Jay Powell may have given some observers the impression that he is not the tough inflation fighter (a sort of Paul Volcker 2.0) that he liked to portray himself as not so long ago.

    However, this possible new image of the Fed changes the elasticity of USD exchange rates to inflation news. The less the US monetary authorities appear to be active inflation fighters, the less USD-positive high inflation data will appear.

    In fact, if monetary policy is perceived to be too dovish, surprisingly high inflation can actually hurt the Dollar. We are nowhere near that point. But Thursday's reaction in the currency market already points to a bit of an image problem that the Fed is facing right now. This is something to keep an eye on in the near future!

     

    Disclaimer: For information purposes only. Past performance is not indicative of future results.
    placeholder
    Heightened uncertainty should support the USD over the near term – HSBCThe 2024 US presidential and congressional elections are scheduled for 5 November.
    Source  Fxstreet
    The 2024 US presidential and congressional elections are scheduled for 5 November.
    placeholder
    Markets may be turning a bit less constructive on the USD – ScotiabankThe US Dollar (USD) is narrowly mixed in quiet trading. Economists at Scotiabank analyze Greenback’s outlook.
    Source  Fxstreet
    The US Dollar (USD) is narrowly mixed in quiet trading. Economists at Scotiabank analyze Greenback’s outlook.
    placeholder
    European indexes recover ground as investors focus on positive data releasesEuropean indexes rebounded on Tuesday, bolstered by market participants focusing on green prints in European economic figures and shrugging off a steeper near-term decline in European Retail Sales in December.
    Source  Fxstreet
    European indexes rebounded on Tuesday, bolstered by market participants focusing on green prints in European economic figures and shrugging off a steeper near-term decline in European Retail Sales in December.
    goTop
    quote