US Inflation Data Helps The Dollar Edge Higher Against The EuroDecember 13, 2022
In the latest trading session, the value of the dollar went up against the euro. This happened as the November data came out for the US producer inflation.
The data shared was hotter than the inflation rates expected for the month of November. The data shared has bolstered the idea of the Feds continuing with the rate hikes in the upcoming months.
At the beginning of November, the Feds announced they would lower the interest rates in the upcoming months.
However, the inflation data and other economic reports for the US have been coming up with hotter-than-expected results. This means that they are compelling for the US Feds to continue with their interest rate hikes.
There is a need for Halting Interest Rate Hikes
In the past four consecutive months, the US Feds have continued increasing the interest rates by 75 bps.
By now, it is evident that the rate hikes have helped bring inflation under control but it has also caused another major problem for the US economy.
With every interest rate hike, the US economy has come closer to the potential of facing recession. The recent interest rate hike has actually increased the fear of recession among traders.
Even banking firms and market experts are expecting a major recession in the year 2023. With every rate hike, the US economy is moving closer to recession.
If the rate hikes continue taking place even at the lowest rates, the chances of a recession will continue to rise.
Such a situation will not be favorable for the US Feds or any other parties being affected by the interest rates and eventually, the recession.
Given the current circumstances, it is important that the US Feds drop the idea of introducing any more interest rate hikes for a while. They have to stop with the hikes so the economy has a breather.
Actual PPI Data was 0.3%
According to the US Feds, the producer prices (PPI) recorded for the United States in the past month was 0.3%. However, the economists had set the forecast for the PPI to 0.2%.
This means that the actual PPI versus the expected PPI is hotter and suggests that the inflation rates are stronger than expected.
With the heightened inflation rates not moving towards moderation, there are high concerns in the market about the participants.
They are not making a move in the USD markets, which initially caused a dip in the trading price of the dollar. However, another major concern and a hot topic among investors was born.
The topic was around the decision made by the US Feds towards interest rates. The traders are now waiting for the consumer price inflation report to come out which is due next week.
Based on the report, the Feds may decide whether they will stick to their announced strategy of lowering interest rates or increasing them.
If the Feds decide to move the interest rates up with the same rate, then the chances of the country moving closer to the recession will rise significantly.
It is expected that the Feds may lower the interest rate hikes but the investors are also bracing for any kind of surprise from the decision-makers.
Dollar’s Performance against Major Currencies
The value of the dollar has experienced a significant surge against major currencies such as the euro.
The euro has experienced a 0.1% decline versus the dollar while the value of the sterling has surged 0.3% versus the dollar. At the time of writing, the value of the sterling is sitting at $1.2273 versus the dollar.
This is the third week the value of the sterling has continued rising against the dollar. The dollar has suffered a dip versus the trading price of the Japanese yen as well.
The latest report shows that the yen is currently sitting at a high of 136.46 against the dollar after the greenback dipped by 0.2%.