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Forex Traiding

The first “step” was not continued, inflation played quietly


Inflation in the US is expected to accelerate, the consumer price index reached 5% in annual terms or to a maximum of 13 years. Core inflation rose from its highest level since 1992 to 3.8%. It is of great importance that the monthly value of the indicator has gone far beyond the limits of a reasonable increase, which means that we are talking about high-inflationary pressure in the United States. In the meantime, the American authorities believe that “the devil is not as bad as he is portrayed.” They are once again trying to calm the markets, but the fact that officials are commenting on this topic already speaks volumes. However, on Thursday, administration spokesman Joe Biden reiterated that the current surge in consumer prices is a temporary phenomenon. The assessment of the American authorities was shared by professional forecasters, investors and businessmen. Thus, the financial community intends to convince that consumer prices in the US are likely to peak this summer. The slowdown in price growth should occur in the fall period. “In the next few months, the rise in prices will reach its peak. We will probably see the worst this summer, and (then) in the fall everything will start to return to normal, ”the official noted. A White House spokesman also dismissed concerns from Republican lawmakers that the US President’s proposed increases in spending on infrastructure, childcare and community colleges would put further pressure on prices, as these spending will only begin in 2023 and stretch over a decade. Hence, it is clear that the position of the American authorities remained unchanged. It is unlikely that May inflation will scare the Fed either. Investors, who still harbor hope that the regulator’s position may change after the publication of the price release, will be disappointed. There are certain expectations for Jackson Hole in August, but little will become clear here either. Jerome Powell is unlikely to indicate the future trajectory of interest rates in August. If the Fed confirms the temporary nature of inflation in the country next week, the appetite for criticism will increase. Now, as analysts say, special attention should be paid to the dynamics of the US debt market. Yield growth is quite capable of pushing the dollar into positive territory. Meanwhile, on Thursday investors changed course and sent long-term US yields lower during the trading session, suggesting that inflationary pressures are temporary. On the whole, the “American” reacted sluggishly to the fundamentally important Thursday. There was a hint of a roller coaster, but it didn’t happen. He continued to hesitate, unable to determine the direction. As for the ECB, the meeting was undoubtedly a passing one. Nothing supernatural happened here. There is information that three representatives of the Central Bank came forward to cut the PEPP program. They cited the improved prospects of the bloc’s economy as the reasons. Official data also suggests that the regulator will continue to buy bonds at a faster pace than at the beginning of the year, despite the economic recovery and rising inflation. Judging by this decision, one can assume that Europe will lag behind the Americans in curtailing stimulus programs. Such a discrepancy will not benefit the euro and will restrain it from growing in tandem with the dollar, analysts say. However, not everyone is of the same opinion. Someone continues to believe in the growth of the euro against the dollar in the coming months, although the economies of the United States and the eurozone will recover at different rates. Looking at the technical picture, the EUR / USD remains neutral with a bullish bias in the short term, yet the single currency lacks momentum. The bullish sentiment in the pair will increase after the breakdown of the level of 1.2200. – Source: InstaForex

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