The US dollar rebound in the New York sales session yesterday. It could be seen after the inflation data release which was made the market participants surprised. How is it possible?  

When this news was written in the European session two days ago, the index of USD has reached the level of 90.90. Greenback is still winning in any other major currency pairs in the market. 

However, the analysts predicted that the inflation data will not motivate the American central bank to increase the interest rate immediately. The US bureau of Labor Statistics reported about it. 

They showed that the American customers' inflation grew up by 0.8 percent month-over-moth in April 2021. That was four times faster than what the consensus expected (0.2%) for that sequence. 

That Acceleration Pushes the Inflation

It cannot be denied that the acceleration like that really pushes the inflation speed up to 4.2 percent year-on-year. For your information, it is the highest level in 13 years period so far. 

The main data also shows the great progress. The core inflation grew up by 0.9% month-over-moth in April 2021. That pushed the year-on-year speed to the lavel of 0.3%. This information changes many aspects. 

One of them is the changing expectation due to the Federal Reserve policy. The Fed has stated so many times that they will place the transitional inflation jump aside this year because it maybe just temporary.

However, the market is still reacting to that data because it is too far from the expectation. Furthermore, Reuters also reported that the futures contract for the short-term rate has its impact. 

The Fed May Increases the Rate

The short-term interest rate is now reflection the 100% certainty for the Federal Reserve to increases the rate at the end of this year. It means that they don’t have to wait until 2023.

The 10Y US treasury obligation yield is also rocketing to the highest level in two months. It pushes USD to be stronger to various high-risk currencies available in the market right now. 

The GBP / USD is in the level of 1.4020. Meanwhile, the EUR / USD is also slipped in 1.2065. The AUD / USD reached its lowest level in a month and now is in the level around 0.7690 based on the release. 

A strategy expert from the ING wrote in a note for his clients that this risk-off reaction will not stay longer. They are even predicting that it is possible for dollar to drop again under 90 in some weeks ahead. 

The Market Starts to Understand the Fed

The index of dollar or DXY moved flattened around 90.70 since the European session yesterday until in the middle of the Asian session yesterday. The United states consumers inflation data was also surprising. 

It was far from the expectation showed in Wednesday where this situation raised the hope for the increasing rate and pushed the Greenback quick progress. However, the market starts to understand it. 

It seems that the market quite understands that The Fed will not add the interest rate although inflation is higher. So far, that is the most possible decision that will be taken.

The Detail Report from the US Bureau of Labor Statistics

That institution reported that the American producers inflation grew up by 0.6 percent in April 2021 or double up from the market expectation in 0.3%. Another data also shows the progress. 

One of them is the yearly producers speed which was touching 6.2%. That becomes the highest year-on-year record since 2010. That report become an evidence that the inflation speed is real. 

It is especially in the America. However, the release is not responded by the market participants. The fed governor predicted that the speed will beyond the 2% target in two years period.