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US dollar declines after CPI release reported

US dollar declines after CPI release reported
  • According to the December US CPI report, the result was in line with expectations at +6.5% year-on-year.
  • The initial jobless claims for the US came in at 205K, which was lower than the 215K predicted.
  • Fed’s Bullard noted that US households are still holding ample funds which should help to sustain consumption.
  • Fed’s Harker proposed that it is time for the Fed to shift to 25 basis point movements.
  • Fed’s Barkin expressed his support for a rate path which is slower, but could potentially be higher.
  • The December federal fiscal deficit in the US was $85.0B, which was higher than the $70B expected.
  • The Cleveland Fed median month-on-month CPI was +0.4%, compared to the +0.5% seen in the prior month.
  • According to Biden, the annualized inflation in the past three months was 1.8%.

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When it comes to economics, marketplaces are essential components. They are the places where buyers and sellers meet, and through the exchange of goods and services, commerce is conducted.

  • The price of WTI crude increased by 73 cents to $78.14
  • US 10-year yields dropped by 12 basis points to 3.72%
  • Gold rose $22 to $1898
  • The S&P 500 gained 14 points to reach 4004
  • JPY was the strongest currency while USD was the weakest

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On Thursday, two possible explanations may account for the price fluctuations. One is straightforward, while the other is bit more complex.

Inflation data was not particularly alarming as the year-over-year rate of 6.5% was in line with forecasts. This has resulted in a decrease in the likelihood of a 50 basis point increase in the Fed funds market, which fell from 25% earlier in the week to a mere 8%.

The dollar exhibited extreme volatility following the announcement, with a downward trend being evident, particularly against the euro.

The euro did not lead the pack by any means, it was the yen that was on fire. This can be explained by a recent report out of Japan indicating that the Bank of Japan is concerned with potential financial threats to YYC, leading the market to assume it will be addressed or changed at their meeting next week. This caused a surge in the yen that lasted through Europe and into the US trading period.

Today, the Bank of Japan’s shift made maintaining Japanese bonds a risky endeavor. Therefore, I believe there was a significant amount of selling into the BOJ’s cap. Those funds probably moved into United States Treasuries, which caused yields on the 10-year Treasury to lower 10-15 basis points. This could have created a cycle leading to more bond purchases at the 3.50% break in 10-year Treasuries and a decrease in the value of the dollar, which would mean an increase in equity prices.

It’s likely that the markets will be more unpredictable following the Bank of Japan’s decision next week, so make sure to keep an eye on it.

USD/JPY dropped to its lowest point since May when the Jan 3 low was breached, leading to an increase in selling activity.

Several currency pairs experienced breakouts, including the EUR/USD, AUD/USD, USD/CAD, and gold.

The euro has been the focus of the market lately, not just for its relation to the dollar. It appears that the market is speculating that 2023 in Europe won’t be as difficult as previously thought and is pushing European stocks up this year.

Andrew Johnson is a seasoned journalist with a keen interest in the commodity market. He is a regular contributor to, where he covers the latest news, trends, and analysis related to the commodity industry. With years of experience under his belt, Andrew has established himself as a reliable source of information on the global commodity market.