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Forex Market Majors Move Lower Ahead of Inflation Data

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  • Euro & Pound Both Sidelined by Dollar
  • CPI Data in Focus Midweek
  • Markets Optimistic Following Infrastructure Bill

The middle of the week in the forex market has brought about more strength in the Dollar as inflation concern rears its head again. The Euro now finds itself at a 5-month low in the forex market against the Dollar, trading just above 1.17 while the GBP fights a similar story with traders remaining cautious ahead of US inflation numbers set to be released later today. These are again expected to come in hot with a raise of 0.5% for July which would still represent a more than 5% year-on-year jump.

Dollar Marches on Ahead of CPI Data

The key news of the day for those forex trading, is certainly the strength being seen in the US Dollar. This points to a cautionary approach to the numbers of the day from many traders. This upward movement appears not only to have been caused by the pending high inflation figures, but also the feeling that the Fed could move to taper earlier than had been expected. 

With a number of Fed Presidents set to speak later today, they will likely underline this as a needed move given the recently impressive job numbers, but there is still plenty of concern around for rising COVID-19 Delta variant cases that have been coming in increasingly high numbers around the country. There is more optimism amid dropping cases in the Uk, though Sterling still remains pressured by the same Dollar strength. 

Inflation Set to Keep Running High 

Forex brokers, as well as traders, will certainly have a close eye on the  CPI figures released later today. These, analysts expect, will show another strong increase of 0.5% for July. This would produce another near-record number for year-on-year growth above 5%, topped only by the previous month’s increase. The number could also move bond yields up if it hits as projected, or misses to the upside. 

The general message from Jerome Powell and the Federal Reserve remains the same. This is just a transitory event, which may well be the case though not specifically by design if increasing COVID-19 cases hamper the economy. Nevertheless, it is not expected that the number today will have any impact on the Fed’s decision to taper bond buying. 

Wall Street Remains Positive 

Even as concerns picked up around inflation, which could be negative for the equities market, Wall Street remained buoyant yesterday. The markets were up with many being given a boost by the passing of the Infrastructure Bill in the Senate. 

The only major index to slip slightly was the NASDAQ amid a treasury yield that has continued to tick up slightly. This is typically negative for the highly leveraged tech names. The S&P 500 meanwhile closed at a new record high. Early trading in the futures market was quiet with most electing to wait until later in the morning and the CPI figures.

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.

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