15.02.202310:25 Forex Analysis & Reviews: Slowdown in US inflation put pressure on markets

Uncertainty has gripped markets after the release of the January CPI report in the US. The data has led investors to fear that the decline in inflation could slow down considerably and then rise again because according to the report, consumer inflation rose by the expected 0.5% m/m, but fell to just 6.4% y/y. Core CPI also showed the same development, with its monthly value in line with December and in year-on-year terms falling by 0.1%.

No one expected the figure to fall markedly in January, but many did hope that it would be at least in line with expectations. This is why stock indices in Europe and North America closed with mixed dynamics yesterday. Asia also opened with mixed dynamics today.

Talking about dollar, there was an increase after the volatile trading, but not very much. Treasury yields also moved up sharply, but are now falling slightly again.

The main thing that is preventing markets from continuing the rally is the lingering fears that the Fed will have to raise rates above 5%. However, that also has a positive side as it would mean that the US economy will avoid recession.

There will probably be another sell-off today, but it is unlikely to be a strong one. There is also a chance of a slight rise during the end of the US session, accompanied by a decline in Treasury yields. Dollar, however, will resume climbing up.

Forecasts for today:

GBP/USD

The pair is declining on the back of the latest inflation data in the UK. A consolidation of the price below 1.2100 could push the quote down to 1.1960.

USD/CAD

The pair is gaining support, thanks to a stronger dollar and lower crude oil prices. A rise above 1.3380 could lead to a jump to 1.3465.