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13/02/2025 - 08:41 UTCThe US dollar traded between gains and losses against most major currencies on Wednesday, with the dollar index (USDX) ending the session almost unchanged, following the CPI release that showed U.S. consumer prices rose by more than expected in January, pointing to lingering inflationary pressures in the world's largest economy.
Inflation accelerated in January, exceeding forecasts and raising concerns about whether the Federal Reserve will hit its 2% target. Headline consumer prices rose 3.0% year-over-year and 0.5% month-over-month, both higher than expected. Core inflation, excluding food and energy, also increased, reaching 3.3% annually and 0.4% monthly, again surpassing predictions. These figures suggest the recent increase in inflation is influencing future interest rate decisions as indicated by recent comments from the Fed Chairman Powell.
Some positive sentiment is observed in U.S. and European stock indices early on Thursday, as optimism is growing about a potential peace agreement between Ukraine and Russia, which is boosting market confidence. However, the rise was limited by trade war concerns as U.S. President Donald Trump said he would impose reciprocal tariffs on Wednesday or Thursday on every country that charges duties on U.S. imports.
In corporate news, Cisco stock was supported by the surge in AI development and the resulting demand for cloud networking equipment, thus it increased its yearly revenue projection. This positive outlook sent Cisco's stock price soaring by almost 7% in after-hours trading. The company is benefiting from substantial investments by businesses in AI infrastructure, which is fueling sales of Cisco's data center products like ethernet switches and routers.
Oil prices fell sharply on Wednesday, with the two main benchmarks WTI and Brent down by 2.65% and 2.43% respectively on hopes for a Russia-Ukraine peace agreement, which could lead to the lifting of sanctions and a resumption of disrupted oil supplies, and an increase in crude oil stockpiles in the United States, a leading oil producer.
The focus for Thursday turns to U.K. growth data in the form of GDP, another inflation indicator from the U.S. that measures Producer Prices (PPI) and the weekly jobless claims numbers. Some price action could also be observed later this week when retail sales will be announced on Friday.
EUR/USD remained volatile on Wednesday, spending much of the intraday session testing lower levels before rebounding as investors reacted to an unexpected rise in US Consumer Price Index (CPI) inflation. Looking ahead, today's focus will be on US Producer Price Index (PPI) inflation, with European economic data playing a secondary role this week.
January’s US CPI data came in higher than expected, with headline inflation rising to 3.0% year-over-year, slightly above the forecasted 2.9%. A notable driver of this increase was the month-over-month CPI figure, which surged to 0.5%, surpassing the expected 0.3% and the previous 0.4%.
Germany’s Final Harmonized Index of Consumer Prices (HICP) figures are also due today. Attention will also turn to core US PPI inflation, with market expectations pointing to a slight decline to 3.3% year-over-year from 3.5%.
Gold prices recovered some ground late in Wednesday after Federal Reserve (Fed) Chair Jerome Powell reaffirmed the need for restrictive monetary policy amid mounting inflationary pressures and escalating tariff threats from former US President Donald Trump.
The precious metal halted its decline after the US Bureau of Labor Statistics (BLS) reported a rise in inflation above 3%, signaling that the Fed’s anticipated policy easing could be delayed longer than previously expected.
Oil prices declined sharply on Wednesday, shedding more than 2%, after former U.S. President Donald Trump took initial steps toward diplomatic efforts to end the war in Ukraine— a conflict that has supported oil prices due to concerns over global supply disruptions.
Trump held phone conversations with Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskiy to discuss potential peace negotiations. In a statement on his social media platform, Trump announced that he and Putin had agreed to initiate negotiations, with plans to inform Zelenskiy directly.
The Energy Information Administration (EIA) reported a larger-than-expected build in U.S. crude inventories last week, though gasoline stocks saw a surprise draw while distillates unexpectedly increased.
The US 500 slipped on Wednesday after stronger-than-expected inflation data cast further doubt on the Federal Reserve’s timeline for interest rate cuts.
U.S. consumer prices rose faster than anticipated in January, underscoring persistent inflationary pressures that may push the Federal Reserve to hold off on rate reductions.
While inflation has moderated significantly since its post-pandemic peak, Fed Chair Jerome Powell reiterated in his testimony before Congress that the central bank is not rushing to cut rates. Powell emphasized that while inflation is approaching the Fed’s 2% target, it has yet to reach a level that warrants monetary easing.
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