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USD fails to push higher after CPI beats expectations as traders focus on disinflation

By Daniela Hathorn

14:01, 14 February 2023

By Daniela Hathorn

14:01, 14 February 2023

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Close up of $1 US dollar banknote
Close up of $1 US dollar banknote - source: getty images

US inflation is more stubborn than markets had hoped. After the surprising strength in the jobs data at the beginning of the month, a lot of focus has been placed on the upcoming data to determine the state of the economy. Consumer prices have risen 0.5% in January, up from the revised 0.1% in December, and the yearly change is 6.4% slightly below 6.5% in December but above expectations of 6.2%. Core inflation has remained unchanged at 0.4% on the month but the yearly figure has also come in above expectations at 5.6% versus the 5.5% expected. Fuel oil and used cars continue to be the biggest drawdowns in price, versus gasoline, gas, and medical services as the biggest drivers.



Given the positioning in markets, there was a higher risk for a topside surprise which sees the US dollar pick up some bids. So far the move has been quite muted with little momentum in markets, with the Dollar Index has been remaining pretty much unchanged within the daily range, with a slight bearish tilt. Previous to the announcement, the index had been consolidating for 6 sessions after the bounce higher on the back of the Fed meeting and NFP data earlier this month. A break higher seems to be limited by the 50-day SMA (103.057) so it will be an area needed to be cleared before moving higher. 

US dollar Index daily chartUS dollar Index daily chart. Photo: Source: tradingview



0.67 Price
-0.090% 1D Chg, %
Long position overnight fee -0.0081%
Short position overnight fee -0.0001%
Overnight fee time 21:00 (UTC)
Spread 0.00006


1.09 Price
-0.070% 1D Chg, %
Long position overnight fee -0.0107%
Short position overnight fee 0.0025%
Overnight fee time 21:00 (UTC)
Spread 0.00006


132.99 Price
+0.230% 1D Chg, %
Long position overnight fee 0.0104%
Short position overnight fee -0.0186%
Overnight fee time 21:00 (UTC)
Spread 0.010


164.79 Price
+0.250% 1D Chg, %
Long position overnight fee 0.0081%
Short position overnight fee -0.0163%
Overnight fee time 21:00 (UTC)
Spread 0.028

US equities are close to their daily lows after the data release as it plays against the need for the Federal Reserve to soften its monetary policy stance. The S&P 500 is hovering just above 4,100 after a positive session on Monday but the index has seen a spike to 4,175 on the CPI release as it seems that the fact that the data has managed to drop (marginally) from the previous month has been enough to offer a small sense of relief in the immediate reaction despite the higher-than-expected reading.

S&P 500 daily chartS&P 500 daily chart. Photo: Source: tradingview


US bond yields have also dipped after the CPI release despite the positive surprise with the 10-year yield hovering around 4.7%. It is still above its ascending trend line but a close below 3.65% could signal further weakness in US yields, alongside the dollar.

US 10-year yield daily chart.US 10-year yield daily chart. Photo: Source: tradingview

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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