Global MarketsDollar Strengthens as CPI Data Surged by 5.4%- Biggest Monthly Gain in 12 Years

The dollar gained strength as Inflation surged after the release of the consumer price index report that increased by 5.4%, which was higher than the expected 4.9%, the biggest monthly gain since August 2008.

Inflation rose to 4.5% after the CPI report revealed that trucks and cars which make up a third of the total CPI, were the most affected. Other sectors that were affected by the surge include housing, shelter, food, and energy.

The Labor Departments, Bureau of Labor Statistics released a separate document noting that the big hike in the consumer price index negatively affected worker’s wages as average hourly earnings fell 0.5%.

Effect of the Rise in CPI on the Dollar

The dollar index has hit a monthly high after the CPI report and is expected to continue bullish against its rivals as the Fed aims to tighten its monetary policy soon.

The Euro against the dollar was greatly affected by the news making it hit monthly lows and has shown a willingness to drop further as the US economy revives from the Covid-19 pandemic. Other bearish pairs include the British pound against the dollar that hit a lower high at 1.37981 and should continue bearish long term.

CPI DATA
Dollar Performance Chart

 

Government bond yields that have recently been down traded lower to the report, while the stock market futures fell significantly.

“What this shows is inflation pressures remain more acute than appreciated and are going to be with us for a longer period. We are seeing areas where there’s going to be ongoing inflation pressure even after we get past some of those acute price hikes in a handful of sectors.” Sarah House, senior economist for Wells Fargo’s corporate and investment bank

The  consumer price index report confirmed the belief of many that price inflation could be here for a while as most major economies are trying to revive back after the economic fallout caused by the COVID pandemic.

Investors will be keen to see how price reacts to supply and demand areas to get the market’s overall direction.

 

 

 

 

 

 

 

 

 

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