Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Dollar Edges Higher; Fed in Spotlight on Inflation Surge

ForexMay 13, 2021 01:56AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters

By Peter Nurse

Investing.com - The dollar edged higher in early European trade Thursday, with the safe haven currency supported by concerns of an earlier than expected Federal Reserve response to inflationary pressures in the wake of worryingly large jump in U.S. consumer prices.

At 2 AM ET (0700 GMT), the U.S. Dollar Index, which tracks the greenback against a basket of six other currencies, was up 0.1% at 90.775, around its highest level in a week. 

EUR/USD traded 0.1% higher at 1.2075, after dropping around 0.6% the previous session, GBP/USD was flat at 1.4052, and USD/JPY was up 0.1% at 109.73, close to its strongest level in five weeks. AUD/USD fell 0.2% to 0.7712, while NZD/USD rose 0.1% to 0.7160, benefiting from further plans to open the New Zealand economy.

The main driver of these dollar gains has been the surge in U.S. inflation, and the concern this will force the Fed to move away from its ultra-easy monetary policies sooner than its current guidance suggests.

The consumer price index rose 4.2% in April from a year ago, according to data released on Wednesday, well above consensus forecasts for 3.6% and climbing to its highest rate since the eve of the 2008 financial crisis.

Benchmark 10-year U.S. Treasury yields rose to a five-week high above 1.70% overnight, increasing the appeal of dollar-denominated assets, but have since edged back down to 1.685%.

Fed speakers have been very keen to make clear that they expected a bounce in prices as last year's collapse in oil prices and a nascent economic recovery worked its way through the system, but they saw this increase as temporary.

St. Louis Federal Reserve President James Bullard on Tuesday acknowledged the progress the U.S. economy had made, but said it’s still not time to ease back the throttle on policy. He speaks again later Thursday, and the market will be waiting to see whether the CPI number changes his tune at all.

The dollar gains in the foreign exchange markets have been relatively limited, suggesting traders are taking the Fed largely at its word, at least for now. That said, they will turn their close attention to U.S. weekly jobless claims due later on Thursday and retail sales numbers on Friday for guidance on whether the upward pressure on prices will persist.

“From an FX perspective, a higher inflation reading is unlikely to be dollar-positive as long as the Fed sticks to its view ... that the spike in prices should be temporary and there is no need to turn less accommodative,” said analysts at ING, in a note.

“With front-end rates capped and inflation jumping, the dollar is set to retain a deeply negative real rate, which should ultimately assist a bearish USD trend in the remainder of the year.” 

 

Dollar Edges Higher; Fed in Spotlight on Inflation Surge
 

Related Articles

Dollar Edges Higher; Fed Officials Offer Mixed Signals
Dollar Edges Higher; Fed Officials Offer Mixed Signals By Investing.com - Jun 24, 2021 3

By Peter Nurse Investing.com - The dollar edged marginally higher in early European trade Thursday, as traders digested diverse opinions from Federal Reserve policy makers over the...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (3)
John Healy
John Healy May 13, 2021 5:59AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Watch for J Pow (or Kaskari et. Al) to make a dovish statement about the temporary nature of Base Effect inflation and the Fed’s mandate for full employment. True capitalism has perished.
Jim Jones
Jim Jones May 13, 2021 4:56AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
FEDs new mandate is stocks to the moon. J Powell will restart his stock buying program to keep all markets rising.
Catharine Varady
Catharine Varady May 13, 2021 4:47AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
should be same repeated stance from the fed, didn't jerome said for at least 3 years (about 2 years to go after he said it)? it strikes me he talks about economy for whole world, not for usa only
Llewellyn Kruger
Llewellyn Kruger May 13, 2021 4:47AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Indeed Powel did say they are not going to raise rates for 3 years and recently added not until the jobs are back to high enough levels. Assuming he follows through, I think this will cause the stock market to continue to make new highs and really favour energy and commodities.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email