Last week, USD had its worst run in a few days as the markets were waiting for the customer inflation data. Last Tuesday (September 13, 2022), customer prices climbed more than expected, by 8.3% year to year in August; the news triggered a sell-off. EURUSD was down 1%, and BTCUSD lost 4%, as bulls are fighting to defend $21,000 support.
Higher inflation means that the Fed is not done yet with rate hikes. The cheap money is not coming back to the financial markets soon.
The Labor Department reported that the CPI rose 0.1%, while analysts expected a 0.1% drop. It may seem very little, but this is how fragile the markets are in the second half of 2022.
The US Dollar has been winning for the past few months. A weaker dollar caused cryptocurrencies and stocks to rise. At the same time, oil prices have been decreasing as the war in Ukraine seems to change tides with a successful offensive from the defenders pushing Russian forces away.
However, the optimism is still threatened as yet another armed conflict has just started with Azerbaijan attacking Armenia in the disputed Nagorno-Karabakh region. The Russian Federation has traditionally backed Armenia, and it seems Azerbaijan decided to benefit from Moscow’s prolonged involvement in the Ukraine invasion.
What does rising inflation mean?
We have observed a unique situation in recent months. It was USD against all other currencies and asset classes. Market sentiment swings from the enthusiasm that equities and crypto have reached the bottom. If inflation stays high and the interest rates need to remain high, it could stifle the economy.
The US Dollar has been on a losing streak for the past few days. This has caused many people to wonder what is causing this decline and what it means for them and their wallets.
One of the most commonly cited reasons for the US Dollar’s recent decline is concerns about the US economy and its prospects. Other factors that have been blamed include rising interest rates in different countries and trade tensions between the US and its partners.
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