Published on 14.10.2022 10:21

The Euro jumped higher is yesterday’s trading session against the US dollar after the release of the latest inflation figures from the US led to speculation that the US Federal Reserve may have to ease up on their current rate hiking cycle

The US Bureau of Labor Statistics reported yesterday that the consumer price index (CPI), the measure of inflation, fell to 8.2 percent and was down from 8.3% in the year to August.

It's the third month in a row that inflation declined although analysts were predicting a slightly further fall to 8.1%

Although the CPI figures came in lower than last month, they are still exceedingly high which makes it more likely that the US Federal Reserve, will raise interest rates once again next month in an effort to bring inflation down to its 2% target.

"Inflation has persisted despite improvement in factors that were supposedly keeping it elevated -- think energy prices and prices for used vehicles, which declined 1.1% in September," said Brian Westbury, chief economist, at FT Advisors.

"That's because overall inflation has been – and always is – a monetary phenomenon. The problem is that the Fed thinks it can manage inflation just by targeting short-term rates. We think the Fed needs to focus less on hiking interest rates and more on keeping the growth in the money supply under consistent control." he added.

Looking further ahead today, with no major news out of the Eurozone, the main drivers of the Euro/USD currency pair will be the release of the latest retail sales figures and the Michigan consumer sediment index report from the US which are both key indicators of consumer confidence.

Should the numbers come in above expectations the greenback is likely to reverse yesterday’s losses as traders once again speculate that the US Federal reserve will deliver another bumper rate hike next month of at least 75 basis points.


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