Optimism on Inflation Boosts Forex Market

• Euro Peaks High Before Stabilizing
• USD Fall Helps Sterling
• Stocks Fly High on Inflation Slowdown

The big news of the day for the forex market and beyond is the positive sentiment surrounding inflation in the US at least. The Bureau of Labour Statistics brought news that the CPI data for July came in better than expected. This helped major forex currencies as well as stocks on Wall Street to rally strongly through the day. Both the Euro and Sterling have benefited from selling in the Dollar to end the day higher, while stocks on Wall Street enjoy a very hopeful run to finish the day higher. 

Euro Hits Highs Through Day

The Euro and those forex trading the common currency have endured as challenging a period lately as they ever have. The currency traded at parity against the US Dollar on occasion recently and even below. Today brought some welcome relief for the market as the Dollar sold off in response to the CPI figures that were better than analysts had predicted. The pair reached its highest levels in more than a month close to 1.04. 

This settled later in the day but the Euro is still trading positively at 1.03 and looking forward to the second half of the week. The annual rate of inflation in the US managed to come down to 8.5% which is a 0.2% move better than expected and seems to indicate slowing inflation. 

GBP Also Boosted by Inflation News

The British Pound has suffered throughout the recent period and really has not been able to gain traction since the beginning of the pandemic in 2019 in a meaningful way. The Dollar sell-off early in the day allowed some breathing room for the Pound. The currency surged to a two-week high above 1.22 which it remains close to at the end of the day. 

Sterling undoubtedly benefited from the same positive sentiment around inflation that saw traders selling the Dollar today. While CPI numbers were more positive than expected with welcomed dips, core inflation data also came in lower than expected. Both these factors are likely to soften any rate hike to come from the Fed. 

Wall Street Strong as Momentum Returns

As well as forex brokers, stock brokers also noticed a positive uptick in trade today as the relief from better-than-expected CPI data and lower inflation numbers was felt across the street. A generally good week for the markets was made even better today as traders opened up with more confidence through the day. 

All three major indices in the US were moving in the right direction for most of the day following the release of positive CPI numbers. The S&P 500 gained more than 2% to close at its highest level in more than three months. The Nasdaq also closed up almost 3% for its best close since April. The Dow Jones also finished the day up more than 1.5%.