13.06.201910:24 Forex Analysis & Reviews: EURUSD: Inflation data confirmed the likelihood of the Fed lowering interest rates

The euro strengthened slightly against the US dollar after a report indicating that US consumer prices rose in May, but growth became very weak due to low energy prices.

However, the growth of the euro was not prolonged, as major players began to take profit against the background of speculative purchases, which then led to a decrease in the pair.

According to the US Department of Commerce, the consumer price index in May this year increased by only 0.1% compared to the previous month. The core consumer price index, which does not take into account volatile categories, also rose only 0.1% compared to the previous month.

As noted above, energy prices fell sharply in May, which affected the index. Thus, prices fell by 0.6% compared to the previous month, and gasoline prices fell by 0.5%.

Compared to the same period last year, inflation rose only 1.8% in May after rising 2% in April. Base prices rose 2% in May. Economists had expected total prices to rise 1.9 percent and the underlying index to increase 2.1 percent over the same period of the previous year.

Such a weak report once again confirms traders' confidence that the Fed will resort to lowering interest rates. The question now is when it will happen.

JP Morgan expects that the Fed can soften the policy, as low inflation is not a temporary phenomenon, which is expected by Fed Chairman Jerome Powell.

The rating Agency S&P also joined the number of those who believe that the Fed can lower rates until the end of this year. A number of economists are confident that by September this year, the Fed will lower the federal funds rate by 25 bp.

In the afternoon, the report from the Fed-Cleveland, which indicated that the average CPI index in May 2019 increased by 2.7% compared to the same period of the previous year after an increase of 2.8% in April, is higher. The normal CPI rose 1.8% in May, while the base index rose 2%.

Data on the budget deficit in the US did not surprise the markets.

Despite the increase in tax revenues, their growth was insufficient to offset government spending. According to the US Treasury Department, the US budget deficit increased by 39% to $739 billion against $532 billion in the same period last year.

As noted above, the main increase in spending was recorded by the US government, where the figure increased by 9% to $3 trillion. These expenses include such items as pension payments of civil servants, medical insurance and military support.

As for revenues, they grew by only 2%, to 2.3 trillion dollars. For the 12 months ended in May, the deficit amounted to $ 985.3 billion, or 4.7% of GDP.