Greenback Strengthened as US CPI Exceeded Forecasts
The US dollar rose to the day’s highs against a basket of the other major currencies after release of economic numbers. The US consumer prices rose more than expected in January, underlining the view that the Federal Reserve will be forced to tighten policy more aggressively this year.
The US Commerce Department said that consumer prices rose by a seasonally adjusted 0.5% last month, above forecasts for an increase of 0.3% and following a gain of 0.2% in December. Year-over-year, consumer prices were 2.1% higher from the same month a year earlier, beating expectations for a gain of 1.9% and after rising 2.1% in the preceding month. The US retail sales dropped 0.3% in January. This was compared to a gain of 0.4% in the previous month. Economists had forecast sales to increase by 0.2%.
The euro is falling against the US dollar, ignoring the positive statistics for the Eurozone and Germany. Industrial production in the euro area grew by 0.4% in December compared with the previous month and by 5.2% year-on-year. Eurozone GDP grew by 0.6% in the fourth quarter of 2017 compared to the previous quarter and by 2.7% compared with the same period in 2016. In general, in 2017, the GDP of the Eurozone grew by 2.5%. The GDP of Germany, the largest economy of the Eurozone, increased by 0.6% compared to the previous quarter and by 2.9% year-on-year in the fourth quarter of last year.
The International Monetary Fund (IMF) stated in a report that the UK business investment growth has been constrained by continued uncertainty about the future trade relationship with the EU. IMF also pointed out that early agreement on a transition period would reduce the uncertainty now facing firms and households.