2021.05.1220:47:00UTC+00Dollar Strengthens After Data Shows Acceleration In U.S. Inflation

The U.S. dollar gained in strength and scored gains against it major counterparts on Wednesday as data showing an acceleration in U.S. inflation in April raised speculation that the Federal Reserve will tighten its monetary policy sooner than expected.

The Labor Department said its consumer price index climbed by 0.8% in April after rising by 0.6% in March. Economists had expected consumer prices to inch up by 0.2%.

Excluding food and energy prices, core consumer prices also advanced by 0.9% in April following a 0.3% uptick in March. Core prices were expected to rise by another 0.3%. The much bigger than expected jump in core consumer prices reflected the largest increase since April of 1982.

With the much bigger than expected monthly increase, consumer prices in April were up by 4.2% compared to the same month a year ago, reflecting the biggest jump since September of 2008.

The dollar index rose to 90.80, gaining about 0.75%, before easing slightly to 90.75.

Against the Euro, the dollar firmed up to $1.2075, gaining about 0.65%. Euro area industrial production increased in March after falling in the previous month, led by growth in all categories, preliminary data from Eurostat showed.

Industrial production rose 10.9% year-on-year after a 1.8% fall in the previous month, which was revised from 1.6%. Economists had forecast an 11.6% increase.

The Pound Sterling was weaker, fetching $1.4054 a unit, more than 0.6% less than the previous close of $1.4141. U.K. gross domestic product shrank 1.5% sequentially in the first quarter, reversing a 1.3% rise in the fourth quarter, the Office for National Statistics reported. Economists had forecast a sequential drop of 1.6%.

The Yen weakened to 109.63 a dollar, down nearly. Preliminary data from the Cabinet Office showed that Japan's leading index rose to the highest level in seven years in March.

The leading index, which measures the future economic activity, grew to 103.2 in March from 98.9 in February.

The Aussie slid against the greenback, with the AUD-USD quoting at 0.7725, compared with 0.7842 on Tuesday.

The Swiss franc weakened to 0.9086, dropping by more than 0.5%, while the Loonie slipped to 1.2131 a dollar, about 0.25% lower than Tuesday's close of 1.2102.