Yesterday’s US consumer price index report beat forecasts on the year-over-year headline rate, printing at 8.5% vs. estimates of 8.4%. On a monthly basis, the expected increase was just shy of the forecasts and it was this parameter which the market initially decided to focus upon. The reaction saw equities and US bonds lifted higher while the greenback nudged lower. The concept around this initial move was that inflation has potentially peaked and now the slow decline back towards more acceptable levels could begin.
However, this theme soon ran out of steam as reality kicked in. Participants reverted to the notion that consumers are being squeezed even harder at a time when wages are simply not keeping up with price rises. Stock markets reversed while the buck found fresh bids pushing the GBPUSD rate back down to $1.30.
Today’s economic calendar sees UK inflation data as well as a Bank of Canada interest rate decision where the central bank is widely expected to double rates from 0.50% up to 1%.
Written by Viv Savani. 6:20am, April 13th 2022
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