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US consumer prices rise at fastest rate since 2008

USD - United States Dollar

A surge in consumer prices triggered volatile US dollar trading this morning. The Consumer Price Index rose 4.2% from a year earlier, the sharpest rise since September 2008.

The index, which measures the price of a basket of goods as well as energy and housing costs, showed a 0.8% rise month-over-month. Analysts expected a 0.2% increase. The higher than expected inflation figures could pressure the US Federal Reserve to increase rates sooner than expected. Should this happen, we could see a renewed demand for the US dollar.

The US Dollar Index shot up to 90.60 on the news this morning before pulling back and erasing any gains against the major currencies.

Key Movers

The euro was down on the slightly stronger dollar, trading at 1.209 this morning.

GBPUSD was only modestly lower this morning, holding steady at the 1.41 mark. This week the pound hit three-month highs against the dollar, driven by easing concerns over another Scottish independence referendum, England’s reopening and the US Federal Reserve indicating its holding steady on interest rates.

The Australian dollar tracked sideways through trade yesterday amid rising concern transitory inflation will morph into longer run price pressures. Elevated commodity prices and a shortage of labour supply across the global economy have prompted an uptick across key inflation indicators like PPI and PMI data sets, raising fears central banks will be forced to unwind accommodative policy platforms ahead of a full economic recovery.

Expected Ranges

EUR/USD: 1.207 - 1.217 ▼

GBP/USD: 1.408 - 1.416 ▼

AUD/USD: 0.775 - 0.784 ▼

USD/CAD: 1.206 - 1.213 ▼