empty
02.03.2023 10:54 AM
Will the Fed be able to control inflation?

This image is no longer relevant

The main component of the dollar's weakness yesterday was a report from China indicating that their manufacturing sector is growing strongly. It is an important component of China's economic recovery after its massive shutdown. Another factor putting bearish pressure on the dollar was the strength of the euro. Together, these fundamental events led to a 0.39% decline in the dollar.

Also, in the latest report from the Institute for Supply Management, U.S. manufacturing data shows that inflation continues to rise.

The ISM said on Wednesday that the manufacturing purchasing managers' index rose to 47.7% in February from 44.7% in January. These data coincided with the consensus forecast.

The report also noted that activity in the manufacturing sector continues to be at its lowest level since May 2020, when the global economy was forced to stop.

Values of such diffusion indices above 50% mean economic growth, and vice versa. The further away from 50%, higher or lower, the faster or slower the rate of change.

The report said that the price index rose to 51.3%. This is the first time in four months that U.S. producer prices have begun to rise.

Analysts say rising manufacturing prices could mean that the Federal Reserve will not be able to control inflation even as it continues to aggressively tighten monetary policy.

According to the CME FedWatch tool, there is a 73.8% chance that the Fed will raise rates by 25 basis points and 26.2% that the Fed will be more aggressive in raising rates by 50 basis points.

Looking at the components of the report, the new orders index climbed to 47% from 42.5% in January. At the same time, the production index fell to 47.3% from the previous 48%.

The labor market lost momentum, returning to a lower reading of 49.1% from 50.6% in January.

On such mixed data, the dollar is still holding its former positions with small deviations, reinforcing itself with the yield of 10-year bonds.

This image is no longer relevant

Yields on 10-year bonds topped 4% for the first time since October.

Irina Yanina,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

What to Pay Attention to on May 15? A Breakdown of Fundamental Events for Beginners

A relatively large number of macroeconomic events are scheduled for Thursday, but very few are likely to trigger a strong market reaction. The second estimate of Q1 GDP and industrial

Paolo Greco 06:21 2025-05-15 UTC+2

GBP/USD Overview – May 15: The Dollar's Ordeal Continues

The GBP/USD currency pair continued its upward movement on Wednesday, which had started the day before. Recall that on Tuesday, there were no strong fundamental reasons for a significant sell-off

Paolo Greco 03:41 2025-05-15 UTC+2

EUR/USD Overview – May 15: Market Confidence in the Dollar Is Practically Nonexistent

The EUR/USD currency pair continued its recovery on Wednesday despite an empty macroeconomic calendar. We are not counting the sole inflation report from Germany, as it initially had no potential

Paolo Greco 03:41 2025-05-15 UTC+2

The Dollar Is Sentenced

Rumors are swirling. The sharp rally in the South Korean won has sparked speculation that Washington is pressuring its trade partners to strengthen their currencies. Donald Trump has repeatedly stated

Marek Petkovich 00:38 2025-05-15 UTC+2

The Pound Consolidates, Another Attempt at Upward Movement Expected

The UK labor market report showed that wage growth remains high despite a slight slowdown— the three-month average declined from 5.9% to 5.6%, and including bonuses, it decreased from 5.7%

Kuvat Raharjo 00:38 2025-05-15 UTC+2

Yen Resumes the Trend

Be careful what you wish for. Markets interpreted the halving of Japan's GDP forecasts for fiscal years 2025/2026 as a signal that the Bank of Japan would not resume

Marek Petkovich 00:38 2025-05-15 UTC+2

The Euro Is Losing Direction

Inflation in the eurozone remained at 2.2% in April, slightly above the 2.1% forecast, due to a somewhat stronger increase in core inflation. This rise is partially attributed

Kuvat Raharjo 00:37 2025-05-15 UTC+2

EUR/USD: The Dollar Falls Out of Favor Again

The euro/dollar pair has been climbing for two days, mirroring a general decline in the U.S. dollar. Having briefly regained strength, the greenback is now under pressure again: the U.S

Irina Manzenko 18:07 2025-05-14 UTC+2

AUD/JPY. Analysis and Forecast

The current technical and fundamental setup for the AUD/JPY pair points to short-term pressure from the Japanese yen. However, fundamental factors favoring the Australian dollar help maintain the pair's upside

Irina Yanina 11:28 2025-05-14 UTC+2

USD/JPY. Analysis and Forecast

At the moment, the Japanese yen is showing positive momentum against the U.S. dollar for the second consecutive day.The key factor supporting the Japanese currency has been hawkish comments from

Irina Yanina 11:28 2025-05-14 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.