- US inflation October data surprised markets, triggering stock surges.
- The United States dollar remained sold across the FX board, but yesterday’s report means more is coming.
- EUR/USD, NZD/USD, and AUD/USD should keep surging.
Early yesterday’s sessions saw the most crucial economic data of the week – the United States inflation report. Meanwhile, inflation rose in October, though not to the expectations. That means it’s cooling on all indexes while persistent.
Consequently, the core and headline inflation remained lower than anticipations, catalyzing sharp moves within the financial markets. First and foremost, market players sold the United States dollar aggressively.
Secondly, the United States stock market witnessed a rally. Disinflation (soaring inflation at a slow pace) drives the USD lower as it indicates that the Federal will re-think its planned hikes. Furthermore, rate hikes require some time before making their way into the space, and it’s the initial signal that financial tightening works.
Thus, the Fed wouldn’t want massive hikes as a recession could hurt the economy, similar to high inflation. Investors sold the United States dollar, and that could be the start of an escalated trend.
Today’s sessions saw EUR-USD rallying, though not than other USD pairs. However, it rose from beneath 0.9950 to its current level of 1.0170, and there’s room for more. Market players should beware that EURUSD was among the most lucrative to short, considering the ECB lagging the Federal and the Ukraine war. Thus, investors should watch for a short squeeze.
AUD-USD maintains an upside at 0.66. The last Australian inflation data surprised the market to the upside. Thus, the Reserve Bank of Australia may present a massive signal during the upcoming meeting. Attempts to 0.63 seem possible until the trading year-end.
NZDUSD regained the 0.6 crucial level following the October United States inflation figures. Continued EURUSD rally would see NZD-USD climbing beyond 0.63. indeed, yesterday’s US inflation data remains a game-changer. The Federal Reserve was the first to execute rate hikes. Thus, it might be the first bank to respond to the cooling inflation.
Stay tuned for the latest financial updates.