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#1 14-10-2021 21:40:10

Admin & Trader
From: Paris - France
Registered: 21-12-2009
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EUR/USD: US IPC inflation level hits 13-year high, USD sinks

EUR/USD: US IPC inflation level hits 13-year high, USD sinks

High energy prices and supply problems continue to push up the prices of goods and services. The US economy is facing the highest CPI inflation since 2008.

One of the main economic events of the trading week was the release of US inflation data for September. Traders wanted to see if inflation is indeed transitory or if it is holding at current high levels.

The result was mixed. On the one hand, core inflation, which excludes energy and food prices, remained stable at 4% year-on-year.  On the other hand, headline CPI inflation rose by a further 0.1% in September to 5.3% year-on-year. Both rates are at multi-decade highs: core inflation is the highest since the 1990s, while US headline CPI inflation is the highest since 2008.

It is therefore difficult to argue that higher inflation is transitory when it continues to rise, even if not at the same rate as in the past. Energy prices (oil, natural gas) are also rising and, given the current supply problems, the pressure on inflation remains upwards.

The US dollar fell on the news

The market reacted immediately to the news and sent the USD lower across the board. For example, after the release, the pair bounced from the 1.1520 area to near 1.16, and similar actions were seen in other USD pairs.

Perhaps the most impressive reaction was in the gold price. First it approached $1,800, and now it is consolidating under major resistance.

Airline tickets, rental cars and hotel prices fell in September, but much of that was offset by rising accommodation costs. So, for now, inflation is rigid, not transitory.

"Anything worth having is worth going for - all the way." - J.R. Ewing



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