Instant view: lower US inflation drives the dollar lower

  • US inflation 1.5% y/y in February
  • More relevant core inflation down to 2.1% from 2.2% y/y, both below expectations
  • US500 close to resistance, US dollar recoups early loses

The February inflation data is below expectations showing only limited inflationary pressure in the US economy. Why the report is important? Inflation is crucial for the Fed and following an uptick in wage growth in the US there could have been a concern that it could translate into inflationary pressure and force the Fed to hike rates despite slowdown concerns. But that’s not the case and the Fed will be able to stay patient. February was really the last month when high core inflation (ex food and energy) could scare investors as higher base effect should reduce it from March until the end of 2019. US futures have moved up and US dollar down after the release.

US500 is near the key resistance. Lack of follow-up on yesterday’s euphoria could hurt bulls going forward. Source: xStation5

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