As inflation data rekindles bets on tightening monetary policy, the U.S. dollar rises

As inflation data rekindles bets on tightening monetary policy, the U.S. dollar rises


The U.S. dollar hit a 16-month high against the euro on Thursday, after US consumer price inflation soared to a three-year high, reigniting market bets on the Fed’s tightening of monetary policy.

After the overnight plunge, the euro zone currency fell further by 0.1% to $1.15, the lowest level since July 2020.

Despite official data showing that the UK economy is in good shape, the pound to dollar exchange rate is still at its lowest point since December 2020 growing up September increased by 0.6% from the previous month, better than expected.

Data released on Wednesday showed that in the 12 months to October, US consumer prices rose by 6.2%, exceeding economists’ expectations and triggering a The biggest sell-off Since the global market turmoil in March 2020, the size of US short-term Treasury bonds has declined. The U.S. Treasury bond market was closed on Thursday for the National Day.

“The market’s response is to advance the pricing of the first interest rate hike to [Fed’s] Meeting in July 2022,” said Jim Reid, strategist at Deutsche Bank.

Fed Chairman Jay Powell promised to “be patient” with interest rate hikes at the end of the Fed’s monetary policy meeting last week.The Fed also Keep Its long-standing view is that the persistently high inflation level is “temporary” and is driven by the imbalance between supply and demand and the reopening of the economy after the shutdown in 2020.

Standard Chartered Bank strategist Steve Englander said: “In the face of inflation data that will be difficult to release in the next few months, investors must decide whether the Fed and other central banks’ dovish forecasts and policy stances will be sound.”

In a report to clients, Englander stated that the CPI data was “as bad as it seemed.” Standard Chartered’s own measure of US “core” inflation (excluding price changes in food and energy, and epidemic-sensitive commodities such as used cars, hotels, and air tickets) rose by 0.45% from September to October.

At the same time, European Central Bank President Christine Lagarde said at the end of last month that the current high inflation rate in the euro zone will fall below the 2% target in 2023.

European stock markets are close to historical highs and have been boosted by strong corporate earnings in recent weeks, indicating that companies have successfully passed on higher costs to consumers.

The regional Stoxx Europe 600 index was flat and then rose 0.1%, while Germany’s Xetra Dax index fell 0.2%. As exporters were boosted by the weakness of the pound, the London FTSE 100 index rose 0.4%.

Futures contracts tracking the US Standard & Poor’s 500 Index rose 0.3% because investors believed that stocks were less affected by inflation concerns than government bonds paid for fixed income.

According to calculations by the research institute DataTrek, during the period of high inflation from 1972 to 1980, Standard & Poor’s profits increased by 120%, slightly higher than the 110% increase in consumer prices over the same period.

In Asia, Hong Kong’s Hang Seng Index rose 1%, and China’s CSI 300 Index rose 1.6%. According to media reports, the Beijing government is preparing to support the country’s troubled real estate industry.

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