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Abstract:The markets received a massive shake-up as the latest USD inflation figures were released. The positive figures that were released yesterday confirm the trend of falling interest rates which signals the strengthening of the US dollar and the possible aversion of a deep recession. How has this news affected the markets and what can we expect from this point on?
Yesterday the markets received a massive shake-up as the latest USD inflation figures were released. The positive figures that were released yesterday confirm the trend of falling interest rates which signals the strengthening of the US dollar and the possible aversion of a deep recession. How has this news affected the markets and what can we expect from this point on?
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Falling Inflation
For the past couple of months, the biggest fear in the economic world was the possible recession that countries like the US were predicted to go through due to astounding high inflation rates and difficult political and economic current events. Much of those fears may have been lifted yesterday as the inflation rate of the USD has been steadily decreasing, which signals changing economic times and the regain of strength of the economy.
This would mean that there is new faith that is being restored in the dollar. The FED has been constantly hiking interest rates over the past months in reaction to increasing inflation rates. With this slow down in inflation, many now expect the FED to reduce or even stop their hikes, which will encourage more loans in the future and hence more economic activity.
What should we expect going forward as traders
First and foremost we must consider the fact that the next interest rate announcement is sure to cause unexpected volatility. You should mark out the 15th and 16th of March as that will be the next FOMC meeting where ne next interest rates will be decided. However we should expect to go long on USD currency pairs (long for USD first currencies, USDCAD, USDZAR, etc., And short for USD second currency pairs, EURUSD, GBPUSD, etc.)
Disclaimer:
The views in this article only represent the author's personal views, and do not constitute investment advice on this platform. This platform does not guarantee the accuracy, completeness and timeliness of the information in the article, and will not be liable for any loss caused by the use of or reliance on the information in the article.
In this article, we’ll explore how inflation affects forex prices globally, the relationship between inflation and currency value, and why traders monitor inflation closely.
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