The strength of the American currency, which had dominated global markets for a long time, was interrupted by a disappointing CPI report from the United States. Negative macrodata tripped up the dollar, but helped the euro recoup its earlier losses.
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According to current reports, the Composite Consumer Price Index (CPI) in the U.S. rose 0.4% in October 2022, which was below expectations. Last month the U.S. inflation rate rose less than expected. This provoked a powerful rally on Wall Street and led to a sharp drop in the dollar. The current macrodata reduces the likelihood of another key rate hike of 75 bps at the next FOMC meeting, which is scheduled for December 14.
Consumer Price Index in October
The slight increase in the Consumer Price Index in October indicates that although inflation is still a threat to the U.S. economy. However, its pressure is gradually weakening, analysts emphasize. Last month the overall CPI in the US rose by 0.4% monthly and by 7.7% on an annual basis.
Earlier forecasts had suggested growth of 0.6% and 7.9%, respectively. Meanwhile, the core CPI in America, excluding volatile food and energy prices, rose 0.3% month-over-month and 6.3% year-over-year. These figures were also lower than forecasted: experts expected them to be 0.5% and 6.5%, respectively.
Negative macroeconomic data
- Negative macroeconomic data from the USA became the “fuel” for the confident growth of the European currency.
- The Euro was up 0.72% and hit the record high of 1.0085 after the CPI data of 0.9950.
- The euro hit a two-month high, experiencing its finest hour since the greenback collapse.
On the morning of Friday, November 11, EUR/USD was trading near the high of 1.0216. The annual increase in the consumer price index was estimated to be below 8% for the first time since February 2022. This gave markets hope that the pace of the Fed’s current interest rate hike would slow down soon.