New inflation data in the USA
The U.S. Department of Labor released the latest CPI inflation data. Here are the April values:
Source: Macronext.
Analysts from ING Think highlighted that this data is crucial for the direction of U.S. central bank monetary policy.
“Core values ultimately matter most for the Fed,” they said.
The report shows that their impact, while limited, will also be felt in the foreign exchange market.
“The positive effect on the dollar may, however, depend more on stock market factors than on interest rates,” they noted.
“For several currency pairs involving the dollar, including EUR/USD, the global investor sentiment remains a more important driving factor than short‑term interest rate differences or oil prices,” they added.
Economists have recently noted that “good dollar performance usually coincides with weak stock market results.”
“We’ll see if fears of rate hikes could trigger new concerns about stock valuations,” the report reads.
The team, however, says that the key factor in investor sentiment now is the Middle East conflict, and the latest reading will “remain in the shadow” of recent events.
“Recent days have shown how far Iran and the United States are from each other on key nuclear agreement issues. At the same time, markets are reluctant to price in a renewed escalation of the conflict, despite yesterday’s statement from Trump that the ceasefire is artificially maintained, and further reports of military activity in the Strait of Hormuz,” they said.
“The longer this deadlock persists, the greater the risk of dollar appreciation, both short‑ and medium‑term – in the latter case through a more prolonged slowdown of the global economy, with which the dollar typically shows a negative correlation,” they added.
The federal funds rate, last decided by Jerome Powell as Fed Chair, was kept in April at the range 3,5%-3,75%.
Data from the CME FedWatch Tool indicate that Kevin Warsh, who will soon take over the central bank’s leadership, is likely to repeat Powell’s decision at the May meeting, with about 98% probability, due to uncertainties related to the Middle East conflict.
Source: Trading Economics.
Read also: The dollar fell by 20 cents! Now heading towards 4 PLN – a well‑known bank claims. New forecasts for USD/PLN and EUR/USD
See also: Will the dollar return to 4 PLN? A land invasion of Iran still poses a threat. Expert: “Unlikely, but still potentially possible.”
Did the new data affect the dollar and euro rates?
The dollar to zloty rate after the data release stands at 3,61 PLN.
Chart. Dollar to zloty rate (USD/PLN)
Source: TradingView.
The euro to dollar rate reaches 1,17 USD.
Chart. Euro to dollar rate (EUR/USD)
Source: TradingView.
Read also: Will the dollar surprise again? The expert issued a forecast for USD/PLN and EUR/USD. “It’s hard for me to believe there will be no more fires.”
See also: Dollar rate before a “nervous and dynamic” move, is the euro waiting for a drop? The expert issued a forecast for USD/PLN and EUR/USD
