The United States dollar index or it is also known as DXY plunged freely. That was after following inflation data and interim election results that led to a slowdown in the Fed's rate hike.
Dixie was observed to fall to a range of 108.57 when the news was written. It was actually in early trading of the New York session on Thursday (10/November).
That happened as well as potentially slumping further towards a two-month record low. For your information, the US dollar is battered in all major currency pairs, especially USD/JPY and GBP/USD.
The reason is that US inflation data leads to a slowdown in the federal reserve rate increase. Besides that, Dixie was potentially slumping further towards a two-month record low.
Consumer Inflation Showed 0.4% Increase
The US consumer inflation report shows growth of just 0.4 percent in October 2022, or the same as the previous month. As a result, the annual inflation rate decreased from 8.2 percent to 7.7 percent.
In fact, the previous consensus only predicted a decrease in the annual inflation rate to 8.0%. However, the thing that just happened was Core inflation slumped even deeper.
That core inflation data grew by just 0.3% on a monthly basis. It means the raise was just half of the 0.6% growth achieved in the previous period if it was seen from the data.
Annual core inflation also dragged down from 6.6% to 6.3%. The overall United States inflation report this time around could be a strong argument for the Federal Reserve to slow the pace of its rate hikes.
Terminal Rate can be Below 5%
Fed Funds Futures now expects the terminal rate to be below 5%. The odds of a December rate hike of 50 bps (instead of 75 bps) also increased to 71.5%.
However, it seems that market participants may need to wait until the official statement is made. The CPI report reinforced the momentum of the sell-off in the dollar.
This was said by Lee Hardman, a MUFG's currency strategist. The report gives the market more confidence that there could be a reversal in the inflation cycle and the Fed could slow the pace of rate hikes in December.
The US dollar collapsed in this situation which this situation was not predicted by many people. USD/JPY became a loser by scoring a daily slump of more than 3 percent from the 146.59 to 141.50s.
Several Pairs Have a Positive Level
Elsewhere, GBP/USD and EUR/USD became the champions with fantastic gains to touch two-month record highs. AUD/USD also posted a daily gain of 2.3 percent in the 0.6580s.
The market is also currently monitoring the results of the United States by-election. The interim election results show Republicans ahead of Democrats in the fight for House of Representatives and U.S. Senate seats.
However, the gap is tight and still has the potential to present a surprise at the last second. The USD could potentially be bolstered by a Democratic victory, but could come under even more pressure if Republicans win.
Meanwhile, Gold’s Price is Skyrocketing
In Thursday (November 10) evening trading, spot gold prices shot more than 2% towards $1740.28 an ounce. Meanwhile, gold futurex prices on Comex New York also rose by the same percentage to $1744.30.
The XAU/USD chart shows a 2.46% jump to $1748.61 where it was the highest level since August 26. The US inflation data (CPI) released tonight turned out to be lower than expectations.
On a monthly basis, the CPI held at 0.4%, lower than expectations of a 0.6% increase. Core inflation (Core CPI) even fell from 0.6% to 0.3% in October.
In response to America's inflation data, the Dollar subsided to a two-month low. This is a breath of fresh air for traders to buy gold in droves.
