Dollar May Rise as Panic Strikes the Markets on US Inflation Data

Reuters Graphic- Effects of the Rising US Inflation on Markets & the US Dollar

Effects of the Rising US Inflation on Markets & the US Dollar

Over the past year, consumer prices rose 2.1 percent, higher than a forecast for a 1.9 percent increase.

Consumer Price Index (CPI) inflation for the month of January stood at 5.07 percent, down from 5.21 percent in December 2017.

Treasuries slumped and investors marked up expectations for Federal Reserve interest-rate increases.

The latest strong inflation report could put more pressure on USA financial markets, which have been spooked by expectations of faster-than-expected increases in interest rates.

Inflation figures for a big economic data point came out higher than anticipated Wednesday morning, causing stock futures to run in the negative before the opening bell. The figures for December and January are expected to be significantly lower than November when all the black Friday weekend deals were had previous year, it appears that shopping spree has essentially taking over from Christmas sales.

The key January US consumer price inflation report will be released today.

Inflation reached its highest level since 2012 in November at 3.1% and it has since remained stubbornly close to that level. Economists expect January CPI to rise 1.9% year-over-year.

It stated that this was less than 16.92 per cent reported in December 2017, while the corresponding rural inflation rate in January 2018 was 15.89 per cent compared to 16.10 per cent recorded in December 2017.

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"Since the last payrolls about two weeks ago, inflation is the obsession of traders", Pierre Martin, a trader at Saxo Bank in Zurich, said by phone.

As per Use-based classification, primary goods growth rates in December 2017 over December 2016 were at 3.7%.

Inflation has now held above the BoE's crucial 2.0-percent target level for 12 successive months.

The ONS said that smaller increases in food prices were offset by a pick-up in prices for clothing, footwear and recreation. "So this could set off another round of selling as some investors fret about what it means for U.S. interest rates".

It stated that the rural index also rose by 0.77 per cent in January 2018, up by 0.23 per cent when compared with 0.54 per cent in December 2017.

Thomas Wells, manager of the Smith & Williamson Global Inflation-Linked Bond fund, said there is a good probability the BoE won't be able to get CPI inflation back to 2% this year.

United Kingdom manufacturers increased the prices they charged by 2.8%, less than the consensus forecast of 3% and the smallest increase since November 2016.

It added: "On the face of it, this suggests that there is not much pressure on the MPC to raise interest rates again".

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