Dollar Surges as US Consumer Price Index (CPI) Grow Rapidly

The dollar has risen substantially during the US session as consumer inflation data came in considerably higher than expected, hitting a multi-decade high. For the time being, the New Zealand Dollar has been the weakest performer, followed by the Sterling and then the Euro. The yen is losing ground against the greenback while remaining stable against other currencies. Technically, despite a recent gain, the dollar is still caught in a trading range at the time of writing.

The U.S. October CPI surged 0.9% month-on-month, much higher than the 0.5% expected. The core CPI rose 0.6% month-on-month, which was also much higher than the expected 0.3%. During the 12 months, the overall CPI increased by 6.2% year-on-year, higher than the year-on-year growth of 5.4%, and much higher than the expected year-on-year growth of 5.3%. This is also the highest level since November 1990. The annual core CPI soared to 4.6% year-on-year, higher than 4.0% year-on-year, and higher than the expected 4.0%. This is the highest level since August 1991.

As of the week of November 6, the number of first-time jobless claims in the United States fell -4k to 267k, slightly higher than the expected 266k. The 4-week moving average of the initial claim fell -7k to 278k. Both are the lowest levels since March 14, 2020. As of the week of October 30, the number of continuing claims increased by 59,000 to 2.16 million. The four-week moving average of continuing claims for benefits fell by -111,000 to 2.245 million, the lowest level since March 21, 2020.

Dollar Gains As Inflation Worries Return

Risk aversion swept the financial markets, and the dollar reaped the benefits. The reason was US inflation, which rose to its highest level in three decades in October, hitting 6.3 percent year on year. Stocks plummeted as rates jumped, suggesting growing concerns about more tightening in the United States.

In addition, Federal Reserve Bank of San Francisco President Mary Daly stated that excessive inflation hurts, even if it is only transitory. She also stated that changing the rate of monetary policy tightening would be premature.

The EUR/USD exchange rate fell below 1.1500 for the first time since July 2020. As investors await news on the Brexit front, the GBP/USD is approaching 1.3400. The AUD/USD pair has dropped to around 0.7330, with losses partially offset by rising gold prices, which are currently trading at $1,840 per troy ounce after hitting a multi-month high of 1,868.54. The USD/CAD exchange rate is flirting with 1.2500 after crude oil prices succumbed to the general gloom, with WTI closing the day at $81.10 a barrel.