According to the most positive forecasts, the US inflation should have declined to 8.7% from 9.1%. Meanwhile, the main forecast presupposed zero changes. In fact, inflation unexpectedly slowed down to 8.5%, causing a tumble in the US dollar. The reason is obvious. Since the inflation growth pace slackens faster than expected, the Fed may slow down the pace of the key interest rate hike. The fact is that in September, the regulator is likely to raise the benchmark rate by 50 basis points instead of 75 basis points as expected earlier.
US Inflation Rate
Today, the US is going to publish the PPI data that should not only prove yesterday's inflation figures, but also point to its further decline. The indicator may slide to 10.9% from 11.3%. Since the PPI is a leading indicator for inflation, traders will get more evidence that the US Fed will raise the interest rates a bit slower.
US Producer Price Index
However, these are just assumptions. The recent inflation figures may have zero effect on the market situation. Just after the publication of the data, Neel Kashkari, the president of the Federal Reserve Bank of Minneapolis, provided some comments. He believes that a slowdown in inflation will hardly change the overall state of affairs. Once the market understands his words, the greenback may resume gaining in value.
The euro/dollar pair broke the upper limit of the range of 1.0150/1.0270. As a result, the quote jumped by 150 pips, which led to the overheating of long positions. At the moment, we see a technical bounce, which has already returned the pair to the earlier broken range. The level of 1.0270 may act as support. If the price stops falling there, bulls will have a second chance to regain control. Otherwise, the flat may resume its formation, whereas the breakout will be considered a false one.
Following the market trend, the pound/dollar pair increased, thus approaching the high recorded on August 1. Since the price considerably changed during a short period of time, the pound sterling became oversold. This, in turn, caused a bounce. A support level is located at 1.2150, where the pair may reverse.
