US consumer inflation plummeted amid a global pandemic. The release of the US Consumer Price Index (CPI) report on Friday (10 / April) tonight showed a decline of -0.4 percent every month, after stagnating at the 0.1 percent level in the first two months of 2020. March's CPI was lower than expectations a decrease of -0.3 percent, which is the lowest since January 2015.
The US Department of Labor noted that the main cause of the decline in inflation was the fall in oil prices by 10.5 percent. The price of plane tickets, lodging, and clothing also declined due to a lack of buyers due to Physical Distancing to avoid the Coronavirus.
In contrast, prices for food, health services, and automotive jumped. Meanwhile, Core Inflation which did not take into account volatile food and energy prices also did not escape the decline. Core CPI reached -0.1 percent in March, worse than the February level of 0.2 percent and weaker than expectations of a decline to 0.1 percent.
The inflation data added to pressure on the US Dollar which has been weakening since yesterday. During the Easter holiday, the US Dollar Index fell 0.13 percent to 99.43, continuing the previous day's decline.
Apart from weakening inflation, the Fed's new stimulus to support the economy from the impact of the Coronavirus also weakened the US Dollar as it reduced demand for safe-haven assets.
US Unemployment Claims That Never Improved Cause the US Dollar is Weak
According to forex analyst Junichi Ishikawa of IG Securities Tokyo, all the steps taken by the Fed now lead to an increase in the supply of US Dollars. However, with the emergence of news about the reduced spread of the Coronavirus, the US Dollar, which functions as a safe-haven, has weakened.
"The Fed has taken some different steps. But the result is a large increase in the supply of US Dollars," Ishikawa said. "Positive news about the virus, reducing the kind of market panic to run into the US Dollar that we witnessed earlier this year. The result is a gradual weakening of the US Dollar."
US weekly jobless claims never improve. Based on a report by the US Department of Labor on Thursday (09 / Apil) tonight, US citizens who submitted applications for unemployment benefits totaled 6,606,000 people last week. Although lower than the previous week which recorded a surge of 6,867,000, the figure was still higher than the market expectations of 5,000,000.
Overall, US Unemployment Claims have broken the 15 million mark in three weeks. The US Department of Labor itself has stated that the impact of the Coronavirus will still affect the number of Initial Unemployment Claims.
US Dollar Moves Weakening Respond to Release of Unemployment Claims and Fed Stimulus
With the current Unemployment Claim condition and the US NFP falling to minus 701,000 in March 2020, the US employment sector is practically in poor condition. For information, last month's NFP report was the worst since the Great Recession and broke the trend of US employment growth that began in late 2010; longest in history.
At the same time as the release of Unemployment Claims, the US central bank announced the launch of a new loan package of 2.3 trillion dollars. The funds have included support for small businesses and consumers, and the first time is earmarked for states, cities, and municipalities in the United States.
Responding to the release of Unemployment Claims and the Fed's stimulus tonight, the US Dollar moves to weaken. At the time of writing, USD / JPY was down 0.42% to 108,259. The pair failed to maintain the previous upward trend to surpass the psychological threshold in the 109 area.
US producer inflation (PPI) data for March, which was better than expected, was unable to support the movement of the US Dollar. US PPI every month of -0.2% in March, better than the acquisition of -0.6% in the previous month. The data was also higher than expectations of an increase of -0.3%.
