U.S Dollar Set In Motion With Pending Inflation Data
Amid looming U.S. inflation data that may guide the timing of a Federal Reserve interest rate increase, the safe-haven currency stood its ground against major peers and traded near a one-month low against the yen on Wednesday.
The U.S. consumer price index for October is expected to increase by 0.4% from 0.2% in September, with the closely watched year-over-year core measure rising 0.3 percentage points to 4.3%.
This is still well above the Fed’s average annual inflation target of 2%.
After retreating gradually from a more than one-year peak of 94.634 reached Friday, the dollar index, which measures the strength of the greenback against six rivals, was little changed on Wednesday morning, the US Dollar Index was around 94.
As a result, the greenback gauge is licking its wounds near the weekly low after a three-day drop.
Those who wish to see the dollar bulls rise above 94.55 will have to consider last week’s multi-month high around 94.65 as well as the 95 index points.
For the dollar index to break out of the top of its range of 94.5, a print of 0.8% month-over-month is required.
A close eye is being kept on global inflation readings to see whether the rising price pressures are accelerating or waning.
Factory gate prices increased at the fastest pace in China since 1995, exceeding expectations and further reducing profit margins for producers grappling with high coal prices.
As a result of tight supply chains related to the pandemic, U.S. producer prices increased solidly in October according to data released Tuesday.
Treasury Inflation-Protected Securities (TIPS) sold off as traders hedged against the possibility of rising prices.
Investors and the general public are becoming more concerned about inflation as evidenced by the growing demand for government bonds.
In a statement on Tuesday, FED officials said it is not certain that high inflation will become more established than anticipated.
The market should pay attention to the bottoms marked during late October near 93.5 and the last month’s low of 93.3 in the case where the greenback remains weak past 93.8.