Forex & Commodities – Inflation Data Drives Dollar Higher – Economy

The renewed increase in US inflation fuels speculation that the Fed will continue to raise interest rates at a high rate. This caused an increased demand for dollars. The dollar index, which tracks rates against major currencies, rose 0.9 percent to 104.70 points on Friday. In return, the euro fell by more than one percent in evening trading at times to $ 1.0507. According to the information, US consumer prices rose by 8.6 percent in May compared to the same period last year. Analysts had only expected an increase of 8.3 percent. “Inflation is far from peaking,” said Naeem Aslam, chief market analyst at brokerage firm Ava-Trade. “There will be more such high numbers to come.”

Investors feared the Fed would be unable to contain inflation without plunging the economy into recession, said Mark Haefele, chief investor at UBS Asset Management.

Rising interest rates on many southern European bonds also caused unrest. The yield on 10-year Italian bonds climbed to 3.850 percent, the highest level since February 2014. The risk premium (spread) to the German counterparts marked a two-year high. According to strategists, the end of the ECB’s bond purchases at the end of the month and the first interest rate hikes from July could become a problem, especially for highly indebted countries.

An imminent setback for demand from China brought the oil price rally to a temporary end. Brent from the North Sea fell 1.1 percent to $121.78 a barrel. The corona mass tests announced for the weekend in Shanghai and new lockdowns in parts of the Chinese economic metropolis made investors nervous.

source site