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Hot Inflation Data Lifts U.S. Dollar

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The U.S. dollar gained ground against its major counterparts in the New York session on Tuesday, as U.S. consumer inflation rose unexpectedly in the month of August, supporting expectations that the Federal Reserve will stick with a 75 basis-point rate hike this month.

Data from the Labor Department showed that the consumer price index inched up by 0.1 percent in August after coming in unchanged in July. Economists had expected consumer prices to edge down by 0.1 percent.

Sore consumer prices, which exclude food and energy prices, climbed by 0.6 percent in August after rising by 0.3 percent in July. Core prices were expected to increase by another 0.3 percent.

Compared to the same month a year ago, consumer prices were up by 8.3 percent in August, reflecting a slowdown from the 8.5 percent spike in July. Economists had expected the annual rate of growth to slow to 8.1 percent.

The annual rate of growth by core consumer prices accelerated to 6.3 percent in August from 5.9 percent in July. The annual rate of growth was expected to rise to 6.1 percent.

U.S. stocks fell on concerns that the Fed is likely to continue raising rates aggressively to control high inflation.

The CME Group's FedWatch Tool shows that markets are pricing in an 82 percent probability of 75 basis point rate hike at the monetary policy meeting next week.

The greenback dropped in the previous session on hopes that inflation may have peaked in August.

The greenback appreciated to a 6-day high of 144.68 against the yen, after falling to a 4-day low of 141.60 at 8:25 am ET. The pair had closed Monday's deals at 142.83. Immediate resistance for the dollar is likely seen around the 146.00 level.

The greenback touched a 4-day high of 1.0004 against the euro, up from yesterday's close of 1.0121. The greenback may face resistance around the 0.96 region, if it gains again.

The greenback climbed to a 4-day high of 1.1525 against the pound, from a 2-week low of 1.1738 seen at 7:25 am ET. The pound-greenback pair had ended yesterday's trading session at 1.1679. Next key resistance for the greenback is found around the 1.13 level.

The greenback firmed to a 4-day high of 0.9633 against the franc, after hitting 0.9480 at 7:15 am ET, which was its lowest level since August 16. At yesterday's trading close, the pair was quoted at 0.9532. Further rally in the currency may challenge resistance around the 0.98 region.

The USD/CAD pair touched a 5-day high of 1.3124, following more than a 2-week low of 1.2954 it logged at 7:00 am ET. The greenback was trading at 1.2987 against the loonie at yesterday's close. Continuation of the greenback's uptrend may lead it to a resistance around the 1.35 region.

The greenback rose to a 4-day high of 0.6766 against the aussie, after a drop to a 2-week low of 0.6916 at 7:00 am ET. The greenback was worth 0.6885 per aussie at Monday's New York session close. The greenback is likely to locate resistance around the 0.66 region.

The greenback advanced to a 6-day high of 0.6013 against the kiwi, up from a 2-week low of 0.6161 set at 7:00 am ET. At Monday's close, the pair was valued at 0.6137. Should the currency rallies again, 0.58 is possibly seen as its next resistance level.

U.S. monthly budget statement for August is scheduled for release shortly.

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