Summary:
Consumer prices exceeded expectations, disappointing investors anticipating smoother inflation. Gas price surge drove over 50% of the increase.
Consumer prices were hotter than expected, disappointing investors in anticipation of a less bumpy road on inflation. The spike in gas prices accounted for more than half of the gain.
What is more, US core inflation rose 0.3% from July, the first pick-up in six months. But the latest data have been largely overlooked with Treasury yields ad major stock indexes barely changed.
According to the CME FedWatch Tool, the probability that the Fed will pause its rate hikes next week rose to 97%, up from 92% a day ago.
Currency analysts expect the euro to extend its eight-week slide against the dollar even if the ECB raises interest rates on Thursday to tame inflation.
Although the single currency has stabilised lately, it slumped the past couple months amid signs of weakening growth momentum in the bloc.
Citi lowered its 6- to 12-month forecast for the pair to 1.06 from 1.14 while Nomura said ‘it’ll be a moment to fade any EUR/USD strength’ and expected a dip towards 1.05 before year-end.
The euro is trading around its 100-week Moving Average at 1.0740 which acts as a support. If the level holds, a rally towards the 200-day average could be seen.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
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