Core inflation in the United States surged 4.6%, the most in over 30 years
Global stocks came under severe selling pressure while the dollar rallied across the board after the US inflation report surprised on the upside. The CPI jumped 6.2% year-on-year last month, the fastest gain since December 1990. Moreover, core inflation surged 4.6%, also the most in over 30 years. As a result, Wall Street indexes extended the retreat from all-time highs seen earlier in the week. Meanwhile, the greenback surged to fresh yearly tops and was holding on to gains on Thursday despite risk sentiment has improved somewhat since yesterday.
A record jump in consumer prices triggered a jump in expectations for the Fed’s first full rate hike coming in mid-2022. In other words, the dollar was driven north by rising worries about the escalating inflation that could cause the central bank to tighten policy more quickly than it has signaled earlier. A jump in the US 10-year Treasury yields added to the buying pressure surrounding the American currency as well.
Against this backdrop, the euro derailed the 1.1500 region for the first time since mid-2020 and extended losses to the 1.1450 area earlier on Thursday. EURUSD was last seen changing hands around 1.1460, down 0.14% on the day. Despite the sell-off, the common currency is yet to enter the oversold territory, suggesting there is room for further losses in the short term. Should the pressure persist, the euro would target the 1.1400 handle next.
Of note, despite the surging dollar, gold prices jumped on Wednesday to briefly touch five-month highs around $1,870. The XAUUSD pair has settled above the $1,850 region in recent trading, retaining a solid bullish bias on Thursday. On the weekly timeframes, the technical picture keeps improving as well, with the yellow metal looking set to finish the week with the largest gains since May.