Dollar Up, U.S. Inflation Likely to Have Minimal Impact on Fed Policy

The United States Dollar(USD) showed upward momentum in the market on Thursday. Especially in the Asian market, the greenback currency has climbed back up after plunging into new depths. The federal policies are not expected to change anytime soon, although the consumer prices have gone through the roof now. Reports state that even the highest rate in 40 years seems to be not reason enough for the policymakers.

However, the USD has scored a big deal in the market with this recent up-current. Despite the recent fall of the USD, the bunch of currencies in the U.S. Dollar Index has only minimized 0.07% to get to a value of 94.970. Other currency pairs also have made some nominal movements towards the USD. While the USD/JPY, AUD/USD and CNY/USD pairs brought down 0.07%, 0.01% and 0.03% respectively against, the pairs like NZD/USD and GBP/USD edged up 0.16% and 0.11% against the USD. You can learn more here about forex brokers.

The Great Britain Pound looks optimistic among the investors for it looks promising even with the increasing number of COVID-19 cases, thanks to better federal policies. Despite some ridiculous political crises involving the Prime Minister of the United Kingdom, the market rally of Pounds looks unhindered. Furthermore, it is also speculated that the Bank of England would likely increase the rates of interest by as early as February 2022.

The U.S. Dollar, on the other hand, showed 0.6% month-on-month growth in the consumer price index, and the year-on-year rate exceeded 5% easily just as the year ended in December. Reportedly, this is the fastest pace in the growth of the consumer price index ever since 1982. Despite the fastest ever rate of inflation, the Federal policymakers are firm about their hawkish policies. According to Jan Nevruzi of Natwest,  the rate of inflation, no matter how significantly high they are, would not have impacted the way the federal government is operating. Even the market upsurge and the slight relief have nothing to do with the CPI index, in the opinion of the Natwest Strategist.

Another poignant opinion came from Joe Capuroso, the strategist from the Commonwealth Bank of Australia, in a session with Reuters. The federal government tightening its hold is not going to increase the price of the USD. According to him, the U.S. economy is such that its currency will decrease as the world economy strengthens. This is because the U.S. dollar is ‘counter-cyclical’ whose trajectory is diametrically opposing the world economy.