The United States Dollar has finally snapped its losing streak of a few session this morning following the release of upbeat inflation figures today
Overview
After multiple days in a row of the Buck slipping negative, all majors are losing ground against USD today. Though most inflation readings around the world have come in above expectations in January, the US’ CPI rose both more than expected and more than that of other nations that have already released their figures, boosting USD above the pack today and shifting bets on when, if at all, the Federal Reserve may cut interest rates this year.
Monthly CPI rose 0.5% last month, above expectations of 0.3% and also above December’s 0.4% increase. Excluding more volatile items of food and energy, monthly inflation rose 0.4% The full and core annual readings came in at 3.0% and 3.3%, respectively – also above expectations and the prior month. None of these figures instills confidence that inflation is, in fact, returning to the Fed’s 2% target. Traders have shifted their bets on when the Fed will cut interest rates this year from September all the way to December, signaling that there is a question as to whether or not there is any easing coming down the pipe at all this calendar year. This also has begun to raise a larger question as to whether or not interest rates are currently restrictive enough – though it’s quite unlikely the Fed would return to raising interest rates, inflation has crept higher in the last few releases.
This morning’s release comes as President Trump is continuing to call for the Fed to lower interest rates ‘immediately,’ raising pressure on the central bank to help boost economic growth while implementing an economic agenda high on tariffs and low on taxes. Jerome Powell’s testimony to Congress continues this morning, as well, after yesterday he repeatedly emphasized the health of the US economy and the independence of the Federal Reserve from the executive branch of government. Powell will likely receive further questions today on this morning’s CPI reading.
What to Watch This Week…
- UK GDP, Thursday
- US PPI, Thursday 8:30AM
- Eurozone GDP, Friday
- US Retail Sales, Friday 8:30AM
- Monex USA Online is always open
Complete Economic Calendar can be found here.
AUD ⇓
The Australian and New Zealand Dollars are facing down twin losses of three quarters of a percent today against the Buck, after US CPI exacerbated an existing slide prompted by comments from the Trump administration on Australian aluminum exports. An unnamed senior trade adviser said that Australia is “killing” the US’ aluminum market, directly contrasting comments from Australian Prime Minister Albanese that President Trump would consider an exemption for Australia on newly-imposed steel and aluminum tariffs.
JPY ⇓
Japanese Yen is by far the biggest loser against USD across the G10 this morning, sliding more than a percent following US CPI. JPY was already sliding today before the release after losing ground across the last few sessions, but a hot US inflation reading has exacerbated its losses. Though the Bank of Japan looks set to continue to slowly raise interest rates this year and start to close the yawning yield differential between the US and Japan, a longer pause from the Federal Reserve would not help matters. BoJ Governor Ueda also told Parliament the central bank is paying close attention to tariff measures out of the US, and the government has asked President Trump to exclude Japanese firms from tariffs on steel and aluminum.
