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US Dollar Edges Higher as CPI Data Reveals Stronger Inflation

January 18, 2017 at 18:21 by Yahia Barakah

US dollar banknotes and coinsThe US dollar had a small recovery on Wednesday from its losses yesterday. The greenback attempted, with limited success, to find upward momentum, a day after President-elect Donald Trump said the US currency is too strong.

Traders’ demand for the dollar was marginally higher following the release of a report by the US Bureau of Labor Statistics on the consumer price inflation at 13:30 GMT today. The report said that the consumer price index’s reading in December was a seasonally adjusted 0.3% higher in December from the previous month. When excluding food and energy, core consumer prices rose by 0.2% in the last month.

The report also showed that consumer prices rose by 2.1% in 2016, while core prices gained 2.2% on a yearly basis. The Federal Reserve’s target for consumer price inflation has for long been at a range between 2% and 2.5%. The data signaled to traders that inflation is gaining momentum, which could push the US dollar higher and result in interest rate hikes from the Federal Reserve.

Another report by the Federal Reserve showed that industrial production increased by 0.8% in December, compared to a decline by 0.7% in November. Meanwhile, manufacturing output rose by 0.2% in the last month at a time when mining output remained unchanged. The positive data gave the US dollar more support.

EUR/USD traded at 1.0682 as of 17:55 GMT on Wednesday, from 1.0662 at 13:20 GMT, the pair’s lowest level since January 17. EUR/USD started trading today at 1.0698.

If you have any questions, comments, or opinions regarding the US Dollar, feel free to post them using the commentary form below.

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