- Carmine Grigoli, chief investment strategist at Mizuho Securities
Inflation data from the world's largest economy was not expected to provide a significant impact on financial markets. Moreover, keeping in mind strong support at 1.35– the reaction should have been barely noticeable. Nevertheless, after a report from the Bureau of Labor Statistics showed inflation rose in line with forecasts, the most traded currency pair was dragged towards 1.3459, even penetrating the weekly S1.
The cost of living in the United States climbed 0.3% last month following May's 0.4% increase. The main upside pressure came from gasoline prices, which accounted for two-thirds of June's increase. At the same time, annualized CPI climbed 2.1%- unchanged from the previous month. The so-called core measure, which excludes food and energy price, inched higher just 0.1% slowing from 0.3% in May. Inflationary pressure is creeping up, as the U.S. economy is recovering from the recent slump. This is definitely a welcoming development for the Federal Reserve, as there were concerns about sluggish inflation. Steady gains have led analysts to predict the headline inflation gauge running around the 2% target level, could accelerate further as stronger job growth lifts wages. Despite a slight slowdown, the recent performance only supports the case for the Fed to proceed with the tapering process and consider the timing of the first rate hike.
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