Higher-than-expected US inflation weakens EURUSD

13 March 2024 46
Higher-than-expected US inflation weakens EURUSD

US inflation slightly accelerated last month, but its impact on core index kept weakening, indicating that the prices of a broader range of goods will slowly approach the Federal Reserve's 2% target in the coming months.

The headline Consumer Price Index for February was estimated by the Commerce Department at 3.2%, higher than 3.1% in the previous month and Wall Street's consensus forecast of 3.1%.

Inflation rose by 0.4% month-on-month, faster than the 0.3% increase in January but in line with Wall Street's forecast of 0.4%.

So-called core inflation, which excludes volatile food and energy costs, fell to a 2-year low of 3.8%, but was higher than Wall Street's forecast of 3.7%. On a monthly basis, the 0.4% figure also exceeded Wall Street's forecasts and matched the January reading.

Last week, the Labor Department reported that 275,000 new jobs were created in the previous month. The higher-than-expected figure raised concerns among investors about the impact of wage growth on inflation.

That being said, the February employment report also showed that growth in average hourly earnings slowed by 0.1% less than expected, which is the smallest increase since last fall. The index's year-on-year growth slowed to 4.3% from 4.6%, which is in line with Wall Street's forecasts and should ease concerns about soaring wage growth.

Continuing inflationary pressures are thus supportive for the US dollar, even in the EURUSD currency pair.

The overall recommendation is to sell EURUSD. Profit should be taken at the level of 1.0850. A Stop-loss could be placed at the level of 1.1000.

This content is for informational purposes only and is not intended to be investing advice.

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