Lower US CPI does not convince markets

Source: Dukascopy Bank SA


The United States Bureau of Labor Statistics has published the Consumer Price Index data sets. In general, inflation is below market forecasts. Although, the US Dollar reacted to the news by surging.

The CPI and Core CPI were expected to have increased by 0.2% on a monthly basis. Meanwhile, the year-on-year reading was forecast to show price increases of 3.00%. The monthly CPI and Core CPI showed a reading of 0.2% increase. In the meantime, annual number is at 2.9%.

This data release shows the Federal Reserve whether it can cut interest rates and with it reduce the US Dollar's value. Lower than expected inflation signals that the monetary policy can be eased to stimulate the economy. The need to stimulate the economy is being drawn from the recently released bad employment data sets, which revealed that unemployment has increased.

However, the surge of the USD indicates that the market sees the below forecast overall number as not enough. Inflation appears to be persistent in the eyes of the markets.
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