Published on 15.02.2023 14:20

The Euro surged against the US dollar in yesterday’s trading session, reaching a high of 1.08 after the latest CPI figures from the US showed the aggressive rate hikes by the US Federal Reserve may final be bringing inflation under control in the world’s largest economy.

The US Bureau of Labor Statistics reported on yesterday that inflation in the United States, as measured by the Consumer Price Index (CPI), fell to 6.4% year on year in January from 6.5% in December. This was against analysts’ expectations for a figure of 6.2%. On a monthly basis, the inflation numbers hit the market at 0.5% which was in line with analysts’ expectations

The Core CPI, which excludes volatile food and energy prices, rose 0.4% on a monthly basis which was in line with expectations, bringing the annual rate down to 5.6% from 5.7%.

Immediately after the news the Euro, along with most of the major currencies surged against the greenback as speculation mounted that the Fed is on the verge of reducing their rate hikes or finishing the rate hiking program all together now that inflation seems to be under control.

However, towards the end of the day the Euro gave back all its gains as market participants digested the Cpi figures and decided not to place to many bets against the US dollar just yet as they prefer to wait for further confirmation that Inflation in the US is well and truly under control.

As we enter today’s European session, the Euro is under further pressure after a disappointing round of business figures has thrown into question the state of the economic recovery currently underway in the EU.

Industrial production figures on a yearly basis from the Eurozone hit the market at -1.1% against analysts’ expectations for a figure of -0.8% while the monthly figures came in at -1.7% which was well below consensus for a number of -0.7% and substantially lower than last month’s figure of 2.8%.

Looking further ahead today, the main driver of the EUR/USD currency pair will be the release of retail sales figures from the US which are expected to hit the market at 1.8%, a substantial jump from last month’s reading of -1.1% and if analysts are correct, the Euro may be staring at further losses.


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