September 25, 2023

US Dollar Makes Crucial Gain Ahead of Inflation Data

A Calm Before a Possible Storm

The US dollar recorded a little, howbeit, a crucial gain during Tuesday’s trading session and kept the florid Euro at bay as the market waited for the American Inflation Data report to be published. The market is currently wary that the report could cause a barrage of speculations of quicker increases of interest rates.

The global means of exchange climbed up by 2.7% in the money market last week following indications to a hawkish standpoint by the President of the European Central Bank, Christine Largade.

The dollar has, however, not been able to breach the resistance around the $1.1483 level and then eased down by 0.2% to the $1.1418 level during the Asian trading session. The US dollar went up by 0.3% to 115.43 Yen and was helped by the five and ten years Treasury yields, going toward over a 2-year high.

Shockingly, a strong American jobs report last week did put some attention on inflation (predicted to hit a forty-year high at 7.3%) as the Federal Reserve meeting scheduled for March approaches.

USD INDEX price Chart. Source TradingView

In the Futures market, they are beginning to get priced at almost 1-in-3 possibility of a 50 bps rate increase, and the possibility of rapid increases has given the dollar necessary support.

A strategist with NatWest Markets, Jan Nevruzi said that the unexpected beat from the Nonfarm Payroll figures (which the Federal Reserve top officials and financial experts in the White House warned could be relatively weak as a result of the Omicron variant of COVID-19) left the Federal Reserve in a position it wasn’t expecting.

He added that the Consumer Price Index would be a crucial factor in how the story plays till the Fed’s meeting scheduled for March. He noted further that except a big surprise happens, there would probably be just a 25 bps interest rate in March.

The dollar index increased by 0.2% to hit 95.613 after days of dip.

Other Currencies

On Monday, the Australian dollar and Bitcoin shared gains as the equity market in Europe rallied, but the former became a bit lower during early trading on Tuesday as the mood prevalent in Asia is a cautious one. The Australian dollar fell by 0.2% to $0.7109 in early trading on Tuesday.

Bitcoin pushed through the fifty-day average to hit $44,000 for the first time in almost a month of daily crashes, and it held out for an increase of over 17% during four sessions in Asia.

The British pounds dropped some 0.2% to $1.3514 while the dollar in New Zealand dropped to $0.6630. 

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