Daily market commentary: The US dollar strengthening continues, following the release of US inflation data


The US dollar strengthening continued, following the release of US inflation data on Wednesday, with the index that measures the greenback’s performance against other major currencies reaching highs not seen since December 2002. The rise in US consumer prices once again surprised to the upside, with April’s numbers exceeding what had been the consensus expectation amongst analysts and increasing the likelihood of an acceleration in the pace of the Federal Reserve’s monetary policy tightening. Next month, May’s US inflation numbers will be released just a few days before the Fed’s June meeting and another surprise to the upside could end up tilting the US Central bank towards hiking rates by 75 basis points, instead of the currently forecast 50 bp.

Against such scenario, the dollar is expected to remain supported.

Ricardo Evangelista – Senior Analyst, ActivTrades


Gold prices are hedging down as the US dollar hit a high not seen since 2002, keeping the precious metal under pressure due to its inverted correlation with the greenback. US inflation numbers released on Wednesday suggested that consumer prices may have already peaked but still surprised to the upside with a reading of 8.3% in April. The next release of US inflation data will come out just a few days before the Fed’s June meeting and another high reading could strengthen the resolve of the American central bank to control inflation and trigger a 75 basis points rate hike, instead of the 50 bp currently assumed. Against such a backdrop, any gold strength resulting from the precious metal’s role as safe haven and inflation hedge is likely to remain capped by the rampant US dollar.

Ricardo Evangelista – Senior Analyst, ActivTrades

Disclaimer: opinions are personal to the authors and do not reflect the opinions of LeapRate. This is not a trading advice.

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