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Dollar Forex Market Dominance Continues Ahead of Inflation Data

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  • USD Strength Heading into CPI Data
  • Pound and Euro Pressure Continues
  • Wall Street Quiet Ahead of Inflation

The US Dollar forex market continued its show of strength in the early part of this week. The currency continues to dominate the market with traders not yet feeling any kind of risk-on mood. This is unlikely to change through the middle of the week as today will see the release of CPI data for March which is much anticipated by the market. These figures are forecast for more record highs and this has ensured that despite positive economic data, the Pound alongside the Euro both remain under intense pressure. Markets on Wall Street are also extremely quiet in the lead-up to this key data release. 

USD Still Standing Strong Above Rest

There has been no let-up for those forex trading the US Dollar at the beginning of this week. The currency continues to assert itself as the safe currency of choice for traders around the market. Several factors remain at play in the Dollar strength that the market is seeing. Primary among these is the widespread expectation that Jerome Powell and the Federal Reserve will move forward with a 50 basis point rise in interest rates in May. 

Adding to that at this point in the week and month, attention around the market is strongly focused on the US CPI data release which will come today. This brings the issue of rampant inflation back to the forefront for everyone and the record figures expected today have hastened a move even more into the Dollar.

GBP Weaker Despite Positive Numbers

Both the Euro and Pound struggle continues. The former is still floundering below 1.09 against the Dollar with little in the way of domestic data to trade from besides the German ZEW Economic Sentiment Index which dipped. At the same time, promising data from the UK has failed to help the Pound gain any meaningful traction. Unemployment figures moved slightly lower while wage inflation came in as expected. Sterling however still fell. 

This weakness on both sides is more a reflection of the strength of the Dollar than vice versa. All focus is on the US Bureau of Labor Statistics for the CPI figures to be released later in the day. These are expected to show inflation at 8.5% for March. This would be a multi-decade high. 

Stocks Brace for CPI Release

The widely expected record high for CPI figures later today has a quietening impact on Wall Street also. With figures set to show their highest levels since 1981, traders are understandably tentative. All the major indices are flat in the early hours. 

Treasury yields also continue to push toward new highs. The US 10-year yield was above 2.8% on Tuesday, another factor reinforcing Dollar strength and making life more challenging on Wall Street, particularly for growth firms like many on the tech-heavy NASDAQ which has endured a rough ride in recent weeks.

Anthony is a financial journalist and business advisor with several years’ experience writing for some of the most well-known sites in the Forex world. A keen trader turned industry writer, he is currently based in Shanghai with a finger on the pulse of Asia’s biggest markets.