The dollar collapsed on weak inflation data

dollar fell sharply after the release of weak data on inflation in the USA. The growth of basic prices in annual terms has become minimal since January. The dollar index fell to two -month minimums below 109. The euro jumped above $ 1.01 for the first time since September 13. Stock indices, cryptocurrencies and other risky assets have taken off. The US Department of Labor published on Thursday a report showing that the consumer price index (CPI) in the USA in October increased by 0.4% compared to August, while an increase in monthly inflation by 0.6% m/m.

in Compared to the same month of last year, consumer prices in October rose by 7.7%, which also did not reach the growth forecasts by 8%. The annual growth rate of inflation has become the lowest in nine months, since January of this year. The monthly price increase was mainly reflected in increasing housing prices by 0.8% (maximum since August 1990). Energy carriers jumped 1.8% in October after a sharp fall in the previous three months. Food prices also rose 0.6%.

Basic Consumer price index (Core CPI). They do not include food and energy products, increased in October by 0.3% against growth expectations by 0.5% m/m. The annual Core CPI growth rates fell to 6.3%, while the increase was predicted by 6.5% g/g. The monthly increase in basic prices was reflected in the increase in housing prices, as well as higher prices for vehicle insurance, rest, new cars and personal hygiene products.

Meanwhile, a decrease in prices for used cars and trucks, medical care, clothes and flights helped to limit the growth potential basic inflation. Consumer prices in the USA in October have risen less than the market expected. For the first time since February, the annual increase in the consumer price index was below 8%. This strengthened the hopes of investors that the Fed can reduce the pace of their future increase in interest rates, writes Reuters.

“There are more and more data that inflation has reached the peak and will now fall,” Commerzbank notes. – “Therefore, the next increase in the Fed’s rate will probably be smaller.”

head of the Federal Tax Service Dallas Lauri Logan said that October inflation data is the long -awaited relief, but added that they still have to go a long way. President of the Federal Reserve Bank of Philadelphia Patrick Harker also said on Thursday that the Fed could slow down the rate of increase in bets in the coming months.

“Weak data on inflation leads away from the radars of speculators fears, that the Fed will make another increase by 75 points and that the key rate will exceed 5% in this monetary cycle. It will not be legitimate to tune in to a speedy reduction in bets or a pause in raises, but the slowdown is important news for the markets that got the opportunity to breathe free, ”the FXPRO analyst team notes.

Leave a Reply