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U.S. CPI pulled the dollar down


13 May 2020

On Tuesday, the U.S dollar traded lower against most major currencies after the release of U.S inflation data and the increasing concerns about the negative interest rate by investors.

As interest rate tends to decline when inflation is low. Distresses about negative interest rate increased after data showed that core consumer-price index, which excludes volatile food and fuel costs, fell 0.4% from the previous month, the overall CPI dropped 0.8% in April from a month earlier which is the biggest the decline since December 2008, and the annual consumer inflation slowed to 0.3%.

Furthermore, the U.S dollar declined after President Trump said that the Federal Reserve should cut interest rates into negative to boost the U.S economy after suffering from the Coronavirus pandemic. In addition, the U.S dollar still under pressure ahead of Powell’s speech tomorrow.

The U.S. Dollar Index, which measures the power of the Greenback against a basket of six major currencies, ended Tuesday’s trading session at 100.
In Europe, the common currency traded higher against the U.S. dollar on Tuesday. The EUR gain from weak U.S dollar and also after Germany introduced an ‘emergency brake’ mechanism and steps to ease restrictions. EURUSD ended the session at 1.08485.

On the other hand, the Sterling extended its losses on Tuesday against the U.S dollar after the unclear lockdown measurements by the government and the increase in UK debt.

The pound declined after Britain overtook Italy as the worst affected country in Europe as the death toll from COVID-19 topped 32,000 and after data showed that debt exceeded $2.5 trillion and its public sector net borrowing might reach 14% of GDP this year. Moreover, investors are still worried about Brexit deal with Europe and the probability of a no-deal. GBP/USD ended the session at 1.22599.

In Safe-havens space, the Swiss Franc overpowered the U.S. Dollar and finished the session at 0.96941 USDCHF. Likewise, In Japan, the Yen increased against the U.S. Dollar to end at 107.149 USDJPY.

Gold prices closed higher on Tuesday at 1702.10 due to the potential of more stimulus from the U.S. Federal Reserve to support the economy. Gold considered a hedge against inflation and with the increase of stimulus in the future, inflation could increase too.

In Canada, the Loonie fell against the Greenback as investors are alarmed about the possibility of a second wave of coronavirus infections. USDCAD ended the session at 1.40791.
In Australia, the Aussie dollar trader lower against the U.S dollar after China imposed an import ban on four Australian abattoirs as China consider the most important trading relationship for Australia. The AUDUSD closed at 0.64715.

Cryptocurrencies were traded higher on Tuesday. Bitcoin closed the session higher at 8807.8 BTCUSD. Litecoin and Ethereum ended the session higher at 39.80 LTCUSD and 187.13 ETHUSD, respectively.

#source

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