Dollar drops after high inflation readings
14 October 2021
Precious metals were on the run, supported by the falling greenback. Gold was attacking the 1,800 USD threshold, while silver advanced toward its 50-day average near 23.30 USD.
According to Wednesday's data, the US inflation rate rose to a fresh 13-year high of 5.3% in September, while core inflation stayed at 4.0%, thanks only to a sharp drop in airfares. Rising inflation led to a repricing of rate hike expectations, and the market now expects one rate hike by September 2022.
Nevertheless, the dollar dropped sharply, pushing the EURUSD pair above the 1.16 threshold, cable to the 1.37 level, and the NZD and AUD have roared higher. So it looks like the USD has topped out, and we might see further dollar weakness in the coming days.
Oil continues in its upward momentum as investors keep buying even small dips now. At the time of writing, the WTI threshold was trying to settle above 81 USD.
Additionally, the FOMC minutes released yesterday reinforced expectations that the Fed will announce tapering at next month's meeting.
Later today, three FOMC members will speak - Bostic, Barkin, and Williams. Their speeches will be closely watched, and investors will try to find clues whether the central bank is indeed ready to start tapering its bond purchases this year.
Moreover, US PPI indices will be released, expected to continue trending higher (certainly not temporary), and the usual Thursday's jobless claims are also on the agenda.