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U.S. Dollar Appreciates As Hot Inflation Data Backs Early Rate Hike Prospects

dollar 080219 24nov21 lt

The U.S. dollar spiked higher against its major counterparts in the New York session on Wednesday, as the nation's core personal consumption expenditure price index climbed to the highest level since 1991 in October, reinforcing hopes for a faster rate hike by the Federal Reserve.

A plunge in initial jobless claims to their lowest level since November 1969 and an upward revision to the U.S. GDP growth in the third quarter also supported the currency.

Data from the Commerce Department showed that personal income rebounded more than expected in October, while personal spending also surged.

The Commerce Department said personal income climbed by 0.5 percent in October after slumping by 1.0 percent in September. Economists had expected personal income to edge up by 0.2 percent.

Personal spending surged up by 1.3 percent in October following a 0.6 percent advance in September. Spending was expected to increase by 0.9 percent.

A reading on inflation said to be preferred by the Federal Reserve showed the annual rate of core consumer price growth accelerated to 4.1 percent in October from 3.7 percent in September, reaching the highest level since 1991.

Separate data showed that the U.S. economy grew slightly more than previously estimated in the third quarter.

The Commerce Department said real gross domestic product advanced by 2.1 percent in the third quarter compared to the previously reported 2.0 percent increase. Economists had expected the pace of GDP growth to be upwardly revised to 2.2 percent.

Data from the Labor Department showed that first-time claims for U.S. unemployment benefits slid to their lowest level in over fifty years in the week ended November 20.

The Labor Department said initial jobless claims tumbled to 199,000, a decrease of 71,000 from the previous week's revised level of 270,000.

Economists had expected jobless claims to edge down to 260,000 from the 268,000 originally reported for the previous week.

With the much bigger than expected decrease, jobless claims fell to their lowest level since hitting 197,000 in November of 1969.

Investors await the minutes from the Fed's latest meeting to assess policy makers' discussions about the possibility of a faster tapering of the QE program.

Recent comments from some Fed officials suggested a growing disagreement about the pace of prices and raised the likelihood of an acceleration in the pace of tapering.

The currency has been trading in a positive territory in the European session.

The greenback moved up to a 7-1/2-month high of 0.9374 against the franc from Tuesday's close of 0.9331. The greenback may face resistance around the 0.95 region, if it gains again.

The greenback touched 115.47 against the yen, a level unseen since March 2017. The pair had closed Tuesday's deals at 115.12. Immediate resistance for the dollar is likely seen around the 118.00 level.

The latest survey from Jibun Bank showed that Japan manufacturing sector picked up steam in November, with a manufacturing PMI score of 54.2.

That's up from 53.2 in October and it moves further above the boom-or-bust line of 50 that separates expansion from contraction.

The greenback rose to its highest level since June 2020 against the euro, at 1.1186. The pair was worth 1.1248 when it closed deals on Tuesday. Further rally in the currency may challenge resistance around the 1.10 region.

Survey results from the ifo Institute showed that German business sentiment weakened in November.

The business confidence index fell to 96.5 in November from 97.7 in October. The reading was forecast to drop to 96.6.

The greenback climbed to 1.3325 against the pound, its strongest level since December 2020. The pound-greenback pair had ended yesterday's trading session at 1.3375. Next near term resistance for the greenback is found around the 1.32 level.

The greenback edged higher to 1.2710 against the loonie, after touching a session's low of 1.2660 at 5 pm ET. The greenback was trading at 1.2667 against the loonie at yesterday's close. The greenback may test resistance near the 1.29 level.

The greenback advanced to nearly a 2-month high of 0.7186 against the aussie, from Tuesday's close of 0.7226. Should the currency rallies again, 0.70 is possibly seen as its next resistance level.

Data from the Australian Burau of Statistics showed that the total value of construction work done in Australia fell a seasonally adjusted 0.3 percent on quarter in the third quarter of 2021 - coming in at A$53.926 billion.

That beat forecasts for a decline of 3.1 percent following the 0.8 percent increase in the three months prior.

The greenback reached as high as 0.6866 against the kiwi, setting nearly a 2-month high. At Tuesday's close, the pair was valued at 0.6945. Extension of the greenback's upward trading is likely to lead it to a resistance around the 0.66 level.

The Fed minutes from the November 2-3 meeting are set for release at 2:00 pm ET.

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