U.S. Economy

The Dollar rose sharply after data showed U.S. inflation is running hotter than markets were expecting, meaning the Federal Reserve will be emboldened in its desire to raise interest rates.

Stronger than expected labour market data released out of the U.S. on Friday will keep the Dollar.

"In one line: Startlingly terrible, but scarcely believable" - Pantheon Macroeconomics.

The U.S. economy added 528K jobs in July, a number that more than doubled the 250K jobs the market was expecting and aided a rebound in the U.S. Dollar.

A key measure of U.S. inflationary developments adds to evidence a peak in inflation is nearing, weighing on the Dollar at the start of August.

The Federal Reserve has little incentive to step back from its fast paced interest rate hiking cycle after its favoured measure of inflation comes in above expectations.

"Growth momentum is undoubtedly weakening amid headwinds such as rapid policy tightening"

On a day of PMI data releases it is the UK which has surprised positively while the Eurozone and U.S. have all delivered sizeable downside surprises.

The Eurozone economy faces significant supply challenges, but demand in the U.S. economy will be squashed by a very active Federal Reserve to the extent that a recession is now likely in 2023.

"One day, a recession will come, but the current evidence points to upside not downside," says Stephen Gallagher, Head of Research for the Americas at Société Générale in New York.

The Dollar jumped after U.S. inflation figures for April came in stronger than the market was expecting.

A powerful GBP/USD sell-off was meanwhile arrested near 1.2436, with the EUR/USD consolidating at 1.04.

U.S. 10y treasury yields are getting closer to 3% – a level not seen since late 2018.

The GBP to USD exchange rate rose to 1.3040 after U.S. core CPI inflation rose 0.3% month-on-month in March, down on the 0.5% printed in February and underwhelming against the 0.5% the market was looking for.

Forecasters remain confident that inflation is still likely to begin falling around Spring time.

The Dollar jumped on the release of U.S. inflation data that came in stronger than expected.

The Dollar jumped against the Pound and Euro after the U.S. reported 467K jobs were created in January.

The Pound to Dollar exchange rate pushed to its highest level since November 04 after the U.S. Dollar extended a run of losses following the release of U.S. inflation data.

The U.S. Dollar looks set to lose further value to the Pound in the wake of a below-consensus U.S. jobs report according to an analyst we follow.

“The inflation data will be even worse by the time asset purchases end in March.”