US Inflation Quick Analysis: Doomsday will wait, but second “sell the fact” on the dollar looks near


  • US inflation figures for March beat estimates but only marginally.
  • Overhyped expectations may lead to a "buy the rumor, sell the fact" response. 
  • Another scare, about J&J's jabs, may also push the dollar lower. 

Disappointment is the only option when expectations are so high – markets had been abuzz about surging inflation, making an "as expected" figure a trigger to sell off the dollar – exactly as previewed

The Core Consumer Price Index came out at 1.6% yearly, exactly as the economic calendar showed. While headline CPI beat with 2.6% against 2.5%, that is hardly an earth-shattering result. However, the mild moves on the calendar have caused considerable price action – EUR/USD is some 30 pips higher, attacking the monthly highs. Other currencies are also gaining ground against the dollar. 

Apart from the short-term reaction, it is essential to note that 1.6% annual underlying inflation was last seen in late 2020 – and it remains below the pre-pandemic levels above the 2% level. That 2% threshold is the Federal Reserve's target. Doomsday inflation will have to wait.

Officials at the world's most powerful central bank are probably sighing in relief, as they shrugged off any worries of rising prices as transitory. They can continue keeping interest rates near zero and pump $120 billion per month in bond-buying. For the dollar, it means additional pain in the medium term.

Returning to the nearer term, the greenback may be gearing up for another "buy the rumor, sell the fact" response. Authorities in the US have called to halt administering Johnson & Johnson's COVID-19 jabs, potentially slowing America's exit from the crisis. Immunization is also used in other countries.

The move came after six severe cases of blood clots were identified in the US, one of them tragically ending in death. However, nearly seven million people have received single-shot vaccines. That implies that after the dust settles, inoculations may return in some form. 

The safe-haven dollar benefited from the scare. Will it be sold off once more information about these jabs is available? 

Bank to the Future: Interest rates return to market center stage

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD treads water just above 1.0400 post-US data

EUR/USD treads water just above 1.0400 post-US data

Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.

EUR/USD News
GBP/USD remains depressed near 1.2520 on stronger Dollar

GBP/USD remains depressed near 1.2520 on stronger Dollar

Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.

GBP/USD News
Gold keeps the bid bias unchanged near $2,700

Gold keeps the bid bias unchanged near $2,700

Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.

Gold News
Geopolitics back on the radar

Geopolitics back on the radar

Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.

Read more
Eurozone PMI sounds the alarm about growth once more

Eurozone PMI sounds the alarm about growth once more

The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.

Read more
Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

Majors

Cryptocurrencies

Signatures