“U.S. Inflation Data Affects Forex European Market and Puts Pressure on the Federal Reserve”

Investing.com – In the European market on Monday (8th), the U.S. dollar fell slightly, as investors waited for key inflation data to be released later this week to assess the outlook for the Federal Reserve’s future interest rate decision.

As of 17:59 Beijing time (05:59 am ET), the dollar, which measures the dollar’s trade-weighted strength against six major currencies, was down 0.05% at 100.945; it was down 0.05% at 101.16, near a one-year low.

The benchmark U.S. Treasury yield was at 3.435%, at 3.8338%.

The focus of the week was announced on Wednesday. Analysts expect inflation to ease slightly in April, but remain well above the Fed’s 2 percent annual target range.

The evolution of the inflation rate could give investors further clues about the Fed’s monetary policy plans. The U.S. central bank raised borrowing costs by 25 basis points last week, but signaled it would be the culmination of its aggressive year-long tightening cycle, and the Fed dropped language in its monetary policy statement that it expected further rate hikes.

However, April was stronger than expected, complicating the Fed’s task. The data showed an unexpected decline, while rising.

Analysts at ING noted that wage growth “will make some of the more hawkish FOMC members nervous about inflationary pressures coming from the labor market.”

Markets are largely pricing in the possibility that a peak has been reached, with fed funds futures pricing in a 90 percent chance the Fed will keep rates on hold in June.

On the other hand, the Federal Reserve will release its investigation report tonight, and traders may receive more clues about the situation of the US banking industry under the crisis.

Fears of a banking crisis could in turn spureconomy in recessionSuch concerns have weighed heavily on the dollar in recent sessions, while safe-haven demand has shifted to traditional safe-haven assets such as gold and the yen.

It was up 0.19% against the dollar at 1.1038. It also raised its benchmark interest rate by 25 basis points last week, and Governor Christine Lagarde has also indicated that more hikes are likely.

Still, the sharper-than-expected decline, according to today’s data, revived fears of a possible recession in Europe’s largest economy. During the same period, Germany also fell sharply.

Against the dollar, it rose 0.02 percent to 1.2643. Up to double digits in the UK are expected to continue to support the Bank of England to continue to tighten policy. As early as December 2021, it took the lead in tightening, and the bank is expected to continue raising interest rates by 25 basis points to 4.5% this week.

The RMB exchange rate is close to the level of 7. It rose 0.09 percent to 6.9168 and rose 0.03 percent to 6.923. Reported at 2.764%.

Investors will need to keep a close eye on China and data this week. Markets are watching for further clues on China’s economic recovery after business activity indicators (PMI) showed a slowdown in April. Analysts also expect April and inflation to remain low.

[This article is from Yingwei Caiqing Investing.com, to read more, please log in to cn.investing.com or download Yingwei Caiqing App]

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Compiler: Liu Chuan