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- European session review: USD appreciates amid heightened inflation concerns
European session review: USD appreciates amid heightened inflation concerns
USD continued to strengthen against most of its major rivals in the European session on Thursday as an unexpectedly large increase in the U.S. consumer prices in April heightened worries that an acceleration in inflation could force the U.S. Federal Reserve to pull back on its monetary stimulus and hike interest rates that are near zero.
The U.S. Dollar Index (DXY), measuring the U.S. currency's value relative to a basket of foreign currencies, edged up 0.1% to 90.79.
The Labor Department reported on Wednesday the U.S. consumer price index (CPI) rose 0.8 percent m/m in April. Over the last 12 months, the CPI climbed 4.2 percent y/y. This was the highest reading since September 2008. Economists had forecast the CPI to increase 0.2 percent m/m and 3.6 percent y/y in the 12-month period.
However, the Fed officials continue to reassure markets that any surge in inflation will be temporary. The Fed's vice chairman Richard Clarida said on Wednesday that a climb in inflation to above 2% is due to transitory factors and a moderating is expected later this year, but added that the central bank "would not hesitate to act” if necessary to bring inflation down to its "2% longer-run goal."
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