How will the US inflation data affect yields and the forecast for USD?

10 September 2023, Sunday
How will the US inflation data affect yields and the forecast for USD?

The U.S. Dollar Keeps Getting Stronger


The U.S. Dollar’s Winning Streak


The U.S. dollar, which is a way to measure how strong the dollar is compared to other currencies, ended the week above 105.00. This is the highest it’s been since March. It’s been going up for eight weeks in a row, which is the longest winning streak since 2014. This is because the U.S. Treasury, which is in charge of the country’s money, has been making changes to its policies.


The Federal Reserve’s Actions


The Federal Reserve, which is the central bank of the United States, has been raising interest rates to try to control inflation. They have raised rates 11 times since 2022, which is a lot. This has made borrowing money more expensive. The current interest rate is the highest it’s been in 22 years. But even with all these changes, the Federal Reserve might still make more changes in the future.


The Economy is Doing Well


Usually, when the central bank raises interest rates, it slows down the economy. But this time, the economy is actually doing better. Recent data shows that the economy is growing faster this summer. For example, a measure of how well the services sector is doing went up in August. This is a good sign. Another measure shows that the economy is expected to grow at a rate of 5.6% in the third quarter. This means that people are spending more money, which can cause prices to go up.


What Might Happen Next


The Federal Reserve will have meetings in the future to decide what to do next. Right now, most people think they won’t make any changes in September. But in November, there is a chance they might raise interest rates. This chance might go up if a report about inflation, which is when prices go up, shows that inflation is getting worse.


What to Look Out For


On Wednesday, the U.S. government will release a report about how prices have changed in August. It’s expected that prices went up by 0.6% compared to the previous month. This would mean that prices have gone up by 3.6% compared to last year. If the actual numbers are higher than expected, it could be good for the U.S. dollar. But if the numbers are the same or lower than expected, it could be bad for the U.S. dollar.


What Might Happen to the U.S. Dollar

Right now, the U.S. dollar is doing well. It broke through a level that it had trouble with before and reached a new high. If it keeps going up, it might reach another important level. But if it starts going down, there are some levels where it might find support.