Dollar loses after biggest inflation data in decades.

11/06/2021

The EURUSD pair returned to 1.22, USDJPY dropped toward 109, and commodity-linked currencies were all bid after the inflation fiasco continues to worsen in the US.

Data released on Thursday saw the US consumer price index (CPI) jumping 5.0% year-on-year in May, the sharpest rise in more than a dozen years, up 0.6% on the month. In addition, the core CPI, which excludes volatile food and energy prices, increased 3.8% year-on-year, the biggest rise in three decades, and 0.7% month-on-month in May.

US stocks advanced after the data, because why not? Everything is bullish. The dollar remained weaker. Precious metals were also bid. Gold regained 1,900 USD, with silver soaring above the 28 USD threshold.

What was interesting is the fact that the 10-year yield plummeted and broke down from its multi-month consolidation phase, suggesting the uptrend in yields might be over. The next support for the 10-year yield is seen at 1.39%, with the key level to watch and the long-term trend line at around 1.3%.

Should nominal yields continue to collapse and inflation expectations continue to rise, the real yields will go deeper negative, implying a real inflation problem.

Later today, the Michigan consumer sentiment index for June will be released and is expected to tick higher from 82.9 to 84.0. In addition, consumer inflation expectations will be closely watched. 
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