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CPI, dollar falls after weak data, multiple Fed officials to speak
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Hello everyone, today XM Forex will bring you "[XM Forex]: CPI, the US dollar fell after data is weak, and many Federal Reserve officials will make speeches." Hope it will be helpful to you! The original content is as follows:
On Wednesday, the US dollar index fell below the 101 mark. The economic data on this trading day is relatively small. US Secretary of State Rubio attended an informal meeting of NATO foreign ministers from May 14 to 16 to discuss NATO's security priorities, including increasing defense investment and ending the Russian-Ukrainian war. In addition, many Federal Reserve officials will make speeches, and investors need to pay attention.
Analysis of major currency trends
Dollar: As of press time, the dollar index hovers around 100.95, traders remain cautious amid a blur of trade xmmarkets.cnmitments with China and the UK, with new uncertainty emerging after President Trump pushed for ambitious investment and tax plans without detailing how they would affect the economy. Despite the headlines of tariff downgrades, Fitch's effective tariff rate on Chinese goods remains above 40%, heightening doubts about the durability of the recent agreement. Technically, the US dollar index showed a bearish signal, with the price trend near the lower end of the intraday range between 101.19 and 101.76. Both the Relative Strength Index (RSI) and the Ultimate Oscillator are hovering in the 1950s, indicating that the momentum is neutral. Moving average convergence divergence (MACD) shows a modest buy signal, but this is offset by the Stochastic RSI Fast, which expanded in the 1990s—indicating overbought situations. In addition, the 10-cycle momentum indicator close to 2.00 strengthens short-term selling pressure.
1. Affected by the US tariff policies and other factors, the German economy will continue to decline
The latest report released by the German Economic Research Institute on the 13th stated that the German economy is still in recession, and the report predicts that Germany's economic output will fall by 0.2% this year. Previously, the German economy had shrunk for two consecutive years in 2023 and 2024. Reports say Germany isCitizens remain cautious when conducting bulk procurement due to severe impacts from the US government's tariff policies and global uncertainty.
2. The accelerated decline in wage growth in the UK should support the Bank of England further rate cuts
Economists at Bank of America said in a report that a faster slowdown in wage growth in the UK should support the Bank of England further rate cuts. The average wage increase in the UK, regardless of bonus, fell from 5.9% in February to 5.6% in March. Economists say wage growth in the UK may continue to decline, creating conditions for further rate cuts. The market has xmmarkets.cnpletely digested the Bank of England's expectations of another rate cut, and by the end of 2025, the Bank of England is very likely to cut interest rates again. Bank of America expects the Bank of England to cut interest rates three times in August, September and November, bringing policy rates to a low of 3.5%.
3. Analysts: April CPI data did not change the expectation that the Federal Reserve will only cut interest rates once this year
Analysts Anna Wang and Stewart Paul said that the April CPI report showed that inflation in the consumer sector, which was most affected by Trump's tariffs, was showing an accelerated trend. However, deflationary pressures in tourism-related categories and other entertainment services offset some of the gains in xmmarkets.cnmodity prices. The report shows that when evaluating the impact of Trump's tariff policy on inflation, its indirect impact on the service industry must be considered simultaneously. Given the relatively high importance of the service industry in CPI, as the April report shows, deflation in the service industry may offset the rise in xmmarkets.cnmodity prices. Still, the Fed may not get much signal from its April CPI report, as their forecasts suggest inflation will rise in the xmmarkets.cning months. We maintain our benchmark expectations that the Fed will cut interest rates only once this year, which is 25 basis points at its December meeting.
4. The annual inflation rate in the United States cooled down in April Goldman Sachs: Early inventory delays the inflation crisis
The annual inflation rate in the United States cooled down in April, and this month, xmmarkets.cnpanies are working hard to adapt to the impact of Trump's unpredictable trade policy. The monthly inflation rate was 0.2%, higher than -0.1% in March, roughly in line with economists' expectations. In April, Trump tariffs left the market turbulent throughout April. Retailers have been working to keep prices stable for their customers, but they warn that they will eventually have to raise prices. Goldman Sachs economists say xmmarkets.cnpanies' early inventory before tariffs take effect may moderately delay passing higher prices to consumers.
5. In April when Trump announced tariffs, U.S. inflation fell to 2.3%. In April this year, the month when Trump imposed tariffs on the world, U.S. inflation fell to 2.3%, and analysts expected to remain at the 2.4% level in March. While Trump has cut many of the tariffs he announced on April 2, economists warn that most of the impact of import tariffs has not yet appeared and Fed officials expect price pressure to rise further. Trump presses Powell to cut interest ratesAnd added last week that dealing with the Fed chairman is like "playing the piano to a cow." The Fed's favored inflation target is not CPI, but PCE. In March, PCE fell to 2.3%, but was still above the Fed's 2% target. Institutional View
1. Goldman Sachs: It is expected that the US dollar will continue to decline against Asian currencies
Goldman Sachs said that after the recent progress in trade negotiations, the possible direction of the US dollar/Asian currency pair is still downward. It said that despite the recent progress in trade negotiations between China and the United States, the main themes of the market have not changed. These themes are: the gradual diversification of investment from U.S. assets should continue; Asian exporters should continue to convert the U.S. dollar into local currencies; if Asia negotiates trade with the U.S., its currency may be more difficult.
2. Institutions: The weakness of the dollar shows that market distrust of the dollar persists
HSBC foreign exchange analysts say interest rate differences and other traditional factors suggest that the dollar should strengthen. The recent weakness of the dollar shows that other factors are dominating the dollar's movement and market distrust of the dollar continues. The U.S. economic activity, political and structural factors mean that the U.S. dollar should be in a weak state, although the U.S. dollar will not continue to decline for many years. We do not agree with the structural decline of the US dollar, but we understand the risks and the factors that may cause this decline. It takes time for people to recover in the trust of the dollar.
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