The data suggested inflation may have peaked, but was unlikely to cool quickly and derail the Fed’s current monetary policy plans. The market is fully priced for at least a half percentage point increase to the policy rate at each of the next two Fed decisions, on June 15 and July 27, according to the CME FedWatch Tool. “The stronger-than-expected U.S. inflation print heightened concerns over the need for the Fed to accelerate its policy tightening path,” Rodrigo Catril, senior currency strategist at National Australia Bank, wrote in a client note. The May CPI data comes five days before the June Fed meeting, and another “shocker” would make a 75 basis-point hike then a “strong possibility,” he said.
On Thursday, the dollar touched a two-decade high as US inflation slowed less than expected, indicating that the Federal Reserve will continue to tighten policy forcefully. The safe-haven buck also benefited from a drop in global shares amid investor concerns that central banks are lagging in their efforts to control consumer prices, with China’s lengthy COVID-19 lockdowns already posing a threat to development. Riskier currencies, such as the Australian and New Zealand dollars, have fallen in tandem with cryptocurrency prices. The dollar index, which compares the greenback to six major currencies, rose 0.1 percent to 104.22, its best level since December 2002. The consumer price index increased 8.3% on an annual basis in April, down from 8.5 percent in March but still exceeding economists’ expectations of 8.1 percent.
The euro was about flat at $1.05095 after receiving a lift overnight as the European Central Bank overnight firmed up expectations that it will raise its policy interest rate in July for the first time in more than a decade. The single currency plumbed a more than five-year low of $1.04695 at the end of last month. The yen continued to garner support from an easing in long-term Treasury yields from a multi-year peak above 3.2% at the start of the week. Japan’s currency added about 0.2% to 129.67 per dollar, pulling further away from the more than two-decade low of 131.35 reached Monday, as the 10-year Treasury yield retreated to an almost two-week low of 2.862% in Tokyo trading on Thursday. The British pound languished as Brexit headlines returned, with the attorney-general for England and Wales advising the government that it would be within its legal rights to scrap large parts of the Northern Ireland protocol, according to the Times newspaper. Sterling, which also tends to move with risk assets, dipped to $1.2211 on Thursday for the first time in almost two years.
The Aussie slumped 0.76% to $0.6885 and earlier reached $0.68795 for the first time in almost two years. New Zealand’s kiwi dropped 0.79% to $0.6240, also an almost two-year low. Bitcoin slid about 8% to $26,645 but stayed above the previous day’s low of $27,757.77, a level not seen since the start of last year. Smaller rival ether was last down almost 14% at a 10-month trough of $1,785. “Risk assets will surely not like (the U.S. CPI data) because it means that it remains far too premature to price out hikes in the fed funds curve,” TD Securities strategists wrote in a research note. “This market is desperate to try to find the put-in risk assets, but this time around, there will be no bailout because central banks are several months too late in tightening.”
For Latest News Follow us on Google News
- Show all
- Trending News
- Popular By week