USD Ending the Week Higher
The US Dollar is trading on a better footing into the end of this week following a further lift from the US January CPI reading yesterday. Headline inflation was seen rising 0.6% on the month, better than the prior month’s 0.5% reading and the expected 0.4% reading the market was looking for. Core inflation, which strips out more volatile components such as food and energy prices, was also seen rising 0.6% on the month, above the 0.5% reading the market was looking for. On the back of a bumper US jobs report last week, the data is firmly bullish for USD and shows that the US economy remained buoyant in January, shaking off the omicron impact of December.
40 Year Highs in CPI
With this latest increase, US inflation is now at 7.5% annually, the highest it’s been in 40 years. In light of this development, the focus is once again turning to Fed rate hike projections for the year ahead. We heard several Fed members pushing back against the idea of more aggressive tightening just a week ago. However, on the back of this latest slew of positive data, the market is now once again expecting that the Fed will be forced to tighten at a quicker pace than expected. With this in mind, USD risks remain skewed to the upside as we approach the March FOMC meeting.
Technical Views
US10Y
The rally in US10 year yields has seen price breaking out above the recent block of consolidation ahead of the 1.955% level with price now testing the local bull channel top. While the market is moving higher here, we are seeing strong bearish divergence on momentum studies which is worth noting. While we might see some near term correction, the outlook remains bullish while prices holds above the 1.690% level and bull channel low.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.