Euro, Bitcoin fall as USD rises on CPI higher than expected
Last week, the USD had its worst run in a few days as markets awaited consumer inflation data. Last Tuesday (September 13, 2022), consumer prices rose more than expected, by 8.3% year-on-year in August; the news triggered a selloff. EURUSD was down 1% and BTCUSD lost 4% as bulls battle to defend $21,000 support.
Higher inflation means the Fed is not yet finished with rate hikes. The cheap money will not return to the financial markets anytime soon.
The Labor Department reported that the CPI rose 0.1%, while analysts expected a 0.1% drop. It may seem very little, but this is how fragile the markets are in the second half of 2022.
The US dollar has gained in recent months. A weaker dollar sent cryptocurrencies and stocks higher. At the same time, oil prices have fallen as the war in Ukraine looks set to turn the tide with a successful offensive by the defenders pushing back Russian forces.
However, optimism remains under threat as another armed conflict has just started with Azerbaijan attacking Armenia in the disputed Nagorno-Karabakh region. The Russian Federation has traditionally supported Armenia, and it appears that Azerbaijan decided to take advantage of Moscow’s long-standing involvement in the Ukraine invasion.
What does rising inflation mean?
We have observed a unique situation in recent months. It was the USD against all other currencies and asset classes. Market sentiment is swinging from enthusiasm that stocks and crypto have bottomed out. If inflation stays high and interest rates have to stay high, it could stifle the economy.
The US dollar has been on a losing streak in recent days. This has left many wondering what is causing this decline and what it means for them and their wallets.
One of the most talked about reasons for the US dollar’s recent decline is concerns about the US economy and its prospects. Other factors that have been blamed include rising interest rates in various countries and trade tensions between the US and its partners.
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