During early European trading on Wednesday, the US dollar edged up because of strong inflation data. The euro was near a five-week low because of fears that the war in Ukraine could last for a long time.
This chart shows how the dollar is doing against a group of six other currencies. The Dollar Index was up 0.2 percent at 100.485, as of 2:55 a.m. ET (0655 GMT).
The U.S. consumer price index came out, and prices rose 8.5% in March compared to the same month last year, the highest rate since 1981, thanks to the rising cost of gas.
However, the core CPI, which doesn’t include volatile energy and food prices, came in below expectations. It came in at 6.5%. The Federal Reserve may not need to be as aggressive in the second half of this year as some had predicted.
The yield on the 10-year U.S. Treasury was at 2.765% early Wednesday, down from 2.836% before the inflation data came out.
EUR/USD was down 0.1% at 1.0818, just above a new five-week low, after Russian President Vladimir Putin said that peace talks with Ukraine were at a dead end.
ZEW, a German economic research institute, said Tuesday that its economic sentiment index fell to –41.0 points from –39.3 points in March. This is because of the war in Ukraine.
The European Central Bank meets on Thursday, and it has a hard time balancing rising prices with the pressures on growth. It’s unlikely the Fed will raise interest rates at this meeting, but by the end of December, the money markets expect the rate to go up about 70 basis points, which is a lot.
UK inflation rose to its highest level in more than 30 years in March. The annual rate of consumer inflation rose to 7.0%, up 1.1% month-on-month.
The Bank of England has raised interest rates three times in the last three meetings, to levels above those seen before the pandemic. So far, this hasn’t done much to help the cost of living crisis in the country.
To put it another way, the value of the US dollar rose by 0.6% against the Japanese yen. The Bank of Japan has been trying to keep benchmark bond yields at zero, which is in direct contrast to the prices that other countries charge for their debt.
To put it another way, the Reserve Bank of New Zealand raised its official cash rate by 50 basis points to 1.5 percent. As a result, the NZD/USD rate fell 0.7 percent to 0.6801. Adding that “the committee agreed that their policy “path of least regret” is to raise the OCR by more now, rather than later, to keep inflation expectations from rising. The right thing to do is to keep tightening monetary conditions at a steady pace.“
The USD/CADexchange rate was unchanged at 1.2643 ahead of the Bank of Canada’s policy-setting meeting on Wednesday. To fight three-decade-high inflation, the central bank is expected to raise interest rates by a half-percentage point. This will make it the first in the Group of Seven to do this to fight inflation.
