The US dollar collapsed on inflation data

After the US inflation data for April was released, the dollar experienced a sharp decline.

For the past two years, the annual inflation growth rate has reached its lowest point.

The dollar index dropped to 101.2, and it is attempting to recover from this decline.

On Wednesday, May 10, the US Department of Labor reported that the consumer price index (CPI) in the US had increased by 0.4% in April, which was in line with expectations.

In April 2021, consumer prices rose 4.9%, a 0.1% decrease from the 5% growth seen in the previous month. This marks the lowest annual inflation rate in the last two years, compared to the same month in the previous year. No change was expected.

April saw a 0.4% increase in house prices, following a 0.6% rise in March, which was the driving force behind the monthly rise in consumer prices.

In April, energy prices increased by 0.6%, following a 3.5% decrease in March. Gasoline prices rose, counterbalancing the lower prices of other energy components. Food prices stayed the same for two consecutive months.

For the first time in two years, the rate of consumer price growth has dropped below 5%. This indicates that the Federal Reserve's rate increase is having the desired outcome; however, there are still some indications of potential economic trouble.

In April, the Core Consumer Price Index (Core CPI) - excluding food and energy prices - increased by 0.4%, as predicted. On a month-on-month basis, the annualized growth of the Core CPI decreased by 0.1%, reaching 5.5% year-on-year, which was also in line with expectations.

The increase in base costs is indicative of an increase in house prices, as well as the cost of second-hand cars and trucks, car insurance, recreational activities, and household items.

Following the inflation report's release, the likelihood of a 25 b.p. rate hike at the Fed meeting in June decreased from 21.2% to 13.1%. Meanwhile, the market estimates the probability of the rate staying at its current 5.25% to be 86.9%.

At his press conference last week, Fed Chairman Jerome Powell did not explicitly state that there would be no more rate hikes at CBR meetings this summer. He also made it clear that a rate cut this year is unlikely, noting that it is "out of our forecast".