- DXY climbs after the unemployed requests for work better than expected.
- The producers’ price index numbers come in the most softening, raising concerns about weakening the demand.
- Markets are waiting for updates on US diplomatic talks in Russia on Ukraine, a ceasefire.
- Trump threatens 200 % of customs duties on European wines and champagne.
The US dollar (USD) bounced on Thursday, restoring the level of 104.00, where the traders ‘reaction to the most soft producers’ price index data (PPI) and positive unemployment claims numbers. The US dollar index jumped at the beginning after the data was released, but they later obtained gains as investors have created the effects of slowdown and potential demand concerns. Meanwhile, US diplomats (United States) arrived in Russia for the ceasefire talks on Ukraine, and President Donald Trump escalated from trade tensions by threatening a 200 % tariff for European wines and Shampagne.
Digest Market Mark: mixed economic signals, geopolitical tensions rise
- The report of the unemployed requests for the American weekly work showed preliminary claims at 220,000, that is, less than 225,000 expected. Continuous claims fell to 1.87 million, less than 1.90 million expectations.
- The producers’ price index in February (PPI) came weaker than expected, as the main monthly number is expected 0.0 % compared to 0.3 %, and contracting with the basic PPI by 0.1 %.
- On an annual basis, product price indicators have decreased to 3.2 %, less than 3.3 % expected, while the basic product price index decreased to 3.4 % of 3.6 %.
- The markets initially looked at the most enlarged inflation data as a positive for the US dollar, but the gains were quickly reflected as traders interpreted the weaker producers’ price index numbers as a sign of softening the demand.
- American stocks decreased after the product price index data, as feelings were pressured on Trump’s latest commercial threats targeting European imports.
- The CME Fedwatch tool indicates that the markets are widely expecting the Federal Reserve Bank to maintain rates at the March 19 meeting, while the possibilities of lowering prices for May and June continue to rise.
Technical expectations DXY: Overost Bound
The US dollar index (DXY) has been recovered from its lowest level in recent times, climbing over 104.00 with reassessing traders. The RSI and the average medium rapprochement (MACD) indicates a short -term correction, although the sale pressure remains dominant after the sharp decline last week. The main resistance stands near 104.50, while support depends on 103.50, with another possible possibility if sellers regain control.
Common questions about inflation
Inflation measures an increase in the price of a representative basket for goods and services. The main inflation is usually expressed as a change in percentage on a month on a monthly (illiterate) basis on an annual (annual) basis. Basic inflation excludes more volatile elements such as food and fuel that can fluctuate due to geopolitical and seasonal factors. The basic inflation is the number that economists focus on and is the level targeted by central banks, which are assigned to maintaining inflation at a controlled level, and is usually about 2 %.
Consumer price index (CPI) measures changing commodity and services basket prices over a period of time. It is usually expressed as changing a percentage on a month basis on a monthly (illiterate) basis and on an annual basis (YOY). Core CPI is the number targeted by central banks as it excludes food and flying fuel inputs. When the basic consumer price index rises above 2 %, it usually leads to high interest rates and vice versa when less than 2 % is less than 2 %. Since high interest rates are positive for the currency, high inflation usually leads to a stronger currency. The opposite is true when the inflation falls.
Although it may seem intuitive, high inflation in a country pays the value of its currency and vice versa to reduce inflation. This is because the central bank usually raises interest rates to combat higher inflation, which attracts more global capital flows from investors looking for a profitable place to enter their money.
In the past, gold was the asset investors turned in times of high inflation because it maintained its value, and while investors will often buy gold for its safe properties in times of extremist turmoil in the market, this is not the case most of the time. This is because when inflation is high, central banks will put interest rates to combat them. The highest interest rates are negative for gold because it increases the costs of maintaining gold in assets that bear interest or placing money in the calculation of cash deposits. On the other hand, low inflation tends to be positive for gold because it leads to low interest rates, making the bright metal a more applicable investment alternative.