Headline US Inflation Drops to 6%, US Dollar Undecided

US Dollar (DXY) Price and Chart Analysis

• Inflation in the US is declining, but remains high.
• Banking contagion concerns continue to creep into the market.

US headline inflation (y/y) fell by 0.4% to 6% in February, in line with analyst expectations, but core inflation eased by 0.1ppt to 5.5%, also in line. increase. According to the U.S. Bureau of Labor Statistics,

“The Shelter index was the largest contributor to the monthly increase in all items, accounting for more than 70% of the increase, with the Food, Recreation, Home Furnishings and Operations index also contributing. was up 0.4% in a month, the home food index was up 0.3% and the energy index was down 0.6% in a month as both the natural gas and fuel oil indexes fell.

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US Dollar Holds Stronger as SVB Fallout Eyes US CPI Before Fed

The recent bank contagion scare sparked by the failure of the Silicon Valley Bank will remain a top priority when the Fed releases its latest monetary policy decision on March 22nd. Central bank steps to reinforce depositors have eased concerns, but other smaller banks have unrealized bond losses, especially if the Fed continues to raise rates. There will continue to be concerns that Market expectations of further rate hikes have receded sharply in recent days, but if inflation remains high, Powell and his colleagues will either continue to push inflation down by tightening monetary terms, or wait and see. You have to decide whether Earlier rate hikes start to pass through the system, easing price pressure.

The USD fell 15 pips after its release before recouping these small losses and leveling out. The USD remains highly volatile as it currently battles the opposing forces of banking contagion concerns and falling US Treasury yields.

US Dollar (DXY) March 14, 2023

Chart by TradingView

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