The United States Dollar starts the morning heavily on the back foot against all major currencies today after US Consumer Price Index readings came in slightly softer than expected.
Overview
While year-over-year core prices rose 5.6%, as expected, the headline reading came in slightly below expectations at 5.0%, the slowest inflation rate since October of 2021. On a monthly pace, prices rose just 0.1%, slowing significantly over the course of the last year.This is welcome news for the Federal Reserve, still promising to bring inflation back in line with the central bank’s 2% target, long considered a sign of a healthy economy. Currently, Fed bets are pricing in a 69% chance of a 25-basis point hike in May and a hold cycle beginning at the June meeting, a marked change from yesterday. Still-elevated core prices and recent OPEC+ production cuts are reaffirming the need for one more rate hike.As a result of this morning’s reading USD is losing across the board. The Fed’s current projections place the end of its hiking cycle before that of many other central banks around the world, placing substantial pressure on the Buck.
What to Watch Today…
- No major economic events are scheduled for today
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CHF ⇑
The Swiss Franc rallied heavily against USD this morning and reached its strongest price since June of 2021, posting a gain of over half a percent. In addition to soft US CPI readings, the Swiss parliament’s lower house voted overnight against approving a government guarantee of CHF 109 billion for UBS Group’s takeover of Credit Suisse, symbolically showing popular discontent with the deal. Ironically, this may also show the government’s faith in the merger’s success without further assistance.
AUD ⇑
The Australian and New Zealand Dollars rose in tandem this morning against the Buck on the heels of US CPI readings, both posting gains of three-quarters of a percent. Deputy Governor Michele Bullock of the Reserve Bank of Australia overnight spoke again on the bank’s decision to pause its hiking cycle, re-emphasizing that the bank is focused on slowing prices while keeping the labor market in the region strong. Bullock also stated that the RBA raised the possibility of pausing its cycle long before the onset of banking crises around the world.
