USD Falls, While Gold, Chinese CPI, Japanese Yen Surge
Thursday trading saw the Dollar tumble to a nearly nine-month low against the Euro. The move comes on the after the BLS report showed US inflation was easing. Leading to speculation that the Federal Reserve will be less aggressive with rate hikes going forward. The decline in the Dollar came as the Japanese Yen surged, hitting a more than six-month high against the greenback, on a report that the Bank of Japan may take further steps to address the side effects of monetary easing. Additionally Gold futures for February delivery gained $19.90, or 1.1%, to settle at $1,898.80 an ounce on Comex, after trading as high as $1,906.50.
Thursday’s data showed the consumer price index (CPI) dipped 0.1% last month, marking the first decline in the data since May 2020, when the economy was reeling from the first wave of COVID-19 infections. The unprecedented move to close nearly the entire economy, leading to months of paying workers to stay at home. The collateral damage effect saw a market flooded with spending with fewer workers producing. Price pressures are subsiding as the Fed began its fastest monetary policy tightening cycle since the 1980s dampening demand, and bottlenecks in the supply chains ease.
Supply chain effectiveness still has some question marks, as China re-opens its economy after abandoning its COVID-Zero policy. China’s consumer inflation inched up in December from an eight-month low in November, reaching 1.8 percent last month from a year earlier. Breaking down the numbers further show the largest contribution to the increase in Chinas CPI is soaring food costs. The swift adjustment of China’s Covid-19 prevention and control measures in early December and the subsequent surge in infections also impacted the core CPI. Core consumer prices, which exclude food and energy, rose 0.7 percent in December from a year earlier, after a 0.6 percent increase in November.
The increase in January’s CPI will be significant, likely returning above 2 percent, according to Wu Chaoming, vice president of the Chasing Institute.
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