Summary of the week: The return of the US dollar?
A scenario similar to last week for the US dollar, as it declined at the beginning of trading this week with the negative economic data recorded, to touch the level of 100.445, which is its lowest since February 2, 2023.
The most important reasons for the decline of the US dollar
The issuance of a series of negative data for the US dollar, most notably:
The Consumer Price Index was released on an annual basis and recorded a negative reading of 5%, below the forecast of 5.1%.
The Producer Price Index was released on a monthly basis and recorded a negative reading of -0.5%, below the forecast of 0%, and the Core PPI (MoM) also recorded a negative reading of -0.1%, below the forecast of 0.2%.
Unemployment Claims came out and recorded a negative result of 239K, lower than expectations of 233K
Finally, Retail Sales posted a negative reading of -1%, below expectations of -0.4%, and Core Retail Sales posted a negative reading of -0.8%, below expectations of -0.4%.
The turning point for the US dollar
On a monthly basis, the basic consumer price index recorded a reading matching expectations at a rate of 0.4%, which sent a warning to the Federal Reserve that inflation rates will stabilize and not decline as the Fed wants. The same preliminary reading of inflation expectations issued by the University of Michigan recorded a positive reading at a rate of 4.6%, higher than the previous month, which recorded a rate of 3.6%, which indicates an increase in inflation by 1%.
These data were accompanied by some statements by the Federal Reserve members about monetary tightening, the last of which was a member of the Federal Reserve for the state of Atlanta, Rafael Boris, where he stated that the recent data already supports the scenario of raising interest rates by the Federal Reserve in the coming period.
On the other hand, the employment data issued last week and recording a positive reading give comfort to the Fed in the event that it wants more interest rate hikes, and the possibility of a rise in oil prices in the coming period will contribute to the rise in inflation, which indicates more monetary tightening to control inflation.
How did the markets react to the prospect of monetary tightening?
The dollar index rose by about 0.76%, to touch the level of 101.430
10-year bond yields increased by 2.46%, to touch a rate of 3.53%.
Gold declined $56 from the recorded peak at the level of 2048.770, to touch the level of 1992.500
The euro fell against the dollar by 0.65%, to touch the level of 1.09735
The pound sterling fell against the US dollar by 0.98%, to touch the level of 1.23992
