Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 54.76% of retail investor accounts lose money when trading CFDs / Spread betting with this provider. You should consider whether you understand how CFDs / Spread betting work and whether you can afford to take the high risk of losing your money.
Important Notice - Fraud awareness
Important Notice - Scam alert
54.76% of retail investor accounts lose money when trading CFDs / Spread betting with this provider.
Important Notice - Fraud awareness
Important Notice - Scam alert
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 54.76% of retail investor accounts lose money when trading CFDs / Spread betting with this provider. You should consider whether you understand how CFDs / Spread betting work and whether you can afford to take the high risk of losing your money.
Important Notice - Fraud awareness
Important Notice - Scam alert
The vast majority of retail investor accounts lose money when trading CFDs / Spread betting with this provider.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail investor accounts lose money when trading CFDs / Spread betting with this provider. You should consider whether you understand how CFDs / Spread betting work and whether you can afford to take the high risk of losing your money.
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U.S. CPI hits 40-year high, rate hikes expected to come sooner

IN JANUARY, the U.S. CPI came in at an annual rate of 7.3%, the highest level in over 40 years. The investment market believes that the pace and magnitude of the Fed's rate hikes will be faster than expected. Many expect the Fed to raise interest rates at their meeting in March, with analysts suggesting that the Fed may raise rates by 0.5% instead of the usual 0.25% figure to contain inflation. The Fed may also announce an acceleration in reducing its bond-purchase plan while beginning to shrink its balance sheet.  The dollar has reversed the previous week's weak performance and is back above the 96 level.

A high PPI will support the dollar

While the problem of high inflation in the United States continues, investors will pay attention to the PPI data from the United States in January tomorrow. Many will be interested in whether the ex-factory price will impact the high inflation in future. The market estimates that the US January PPl will rise  0.4% compared to the previous value of 0.2%, while the annual rate is expected to fall to 8.9% from the 9.7% recorded previously.  Suppose the PPI data comes in at a high figure. In that case, there is a chance that it will trigger the Fed's determination to speed up the tightening of monetary policy and may significantly increase the rate and pace of the interest rate hikes. Under this scenario, funds in emerging markets will have the opportunity to accelerate the flow of funds to the US dollar, providing vital support and upside for the US dollar.

Another critical factor affecting the Us dollar’s trend in the short term is believed to be the rapidly evolving situation in Ukraine and Russia. U.S. intelligence before the weekend said Russian troops had increased their strength on the Ukrainian border from a week earlier. The US  expected the military operation to escalate into Ukraine on Wednesday. According to the military intelligence, the U.S. military has dispatched troops to support the Ukrainian frontline. Poland and the neighbouring country of Uzbekistan have also sent more troops to guard against the use of force by the U.S., Ukrainian and Russian armies. As a result, geopolitical tensions have escalated, and some funds flowed to the U.S. dollar as a safe-haven asset, supporting the U.S. dollar’s rise.

ECB has no intention of raising interest rates to fight inflation

The Euro may be affected by the tense geopolitical situation in Europe. In addition, the European Central Bank has clarified that despite the problem of high inflation in the Eurozone, it has no intention of cancelling the asset purchase program (APP) and raising interest rates. These explicit remarks affected the Euro’s strength from the previous week. After hitting a high of 1.1490 against the dollar, the EUR/USD later pulled back to the 1.13 level.

Many expect the geopolitical tensions to continue this week. Once the war escalates and an attack is launched, funds will quickly flow into the US dollar for its safe-haven status, and European currencies will be under pressure. As a result, the EUR/USD has a chance to hit the  1.12 or 1.11 level. Technically, the 1.1269 and 1.1225 levels are the first support ranges, and the next step will be at 1.1185 or 1.1138.

Last Updated: 14/02/2022

This market commentary and analysis has been prepared for ATFX by a third party for general information purposes only. Any view expressed does not constitute a personal recommendation or solicitation to buy or sell as it does not take into account your personal circumstances or objectives, and should therefore not be interpreted as financial, investment or other advice, or relied upon as such. You should therefore seek independent advice before making any investment decisions. This information has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. We aim to establish and maintain and operate effective organisational and administrative arrangements with a view to taking all reasonable steps to prevent conflicts of interest from constituting or giving rise to a material risk of damage to the interests of our clients. The market data is derived from independent sources believed to be reliable, however we make no representation or warranty of its accuracy or completeness, and accept no responsibility for any consequence of its use by recipients. Reproduction of this information, in whole or in part, is not permitted.


 

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