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Higher than expected inflation data boosts USD

USD - United States Dollar

The US dollar climbed higher against a basket of currencies this morning, boosted by yesterday’s positive employment data and a faster-than-expected rise in a key inflation indicator. The US Dollar Index was up 0.47% to 90.39 at the time of writing.

The Core Personal Consumption Expenditures Index, which is largely considered by the US Federal Reserve as the best measure of inflation, increased 0.7% last month. In the last 12 months, the index increased 3.1%. Some investors think this higher-than-expected figure could force the Federal Reserve to tighten its monetary policy, which could buoy demand for USD.

Key Movers

GBPUSD was down 0.34% against the dollar this morning, but was still trading close to a three-month high, partly due to commentary that the Bank of England could raise its interest rate earlier than planned. The pound is the second best-performing G10 currency versus the USD this year, up 3.3% year-to-date. A quicker reopening for Britain’s economy on the back of its rapid COVID-19 vaccination program could push sterling higher against the euro and the dollar.

AUDUSD was down 0.64% to 0.76907 this morning after reports that Victoria was entering another seven-day full-scale lockdown. Twelve new COVID-19 cases were recorded overnight.

Expected Ranges

EUR/USD: 1.213 ▼

GBP/USD: 1.413 - 1.421 ▼

AUD/USD: 0.768 - 0775 ▼

USD/CAD: 1.206 - 1.211 ▲