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By xemarketanalysis February 15, 2017 11:43 am
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    XE Market Analysis: Dollar Strengthens as Inflation Jumps

    OVERVIEW

    • Fed Chair, Janet Yellen, signaled yesterday that the central bank could raise rates at its next meeting as all meetings are “live”, leaving an optimistic note on the economy in testimony to Congress.
    • BoJ Governor, Kuroda, said he now has plans to raise the central bank’s bond yield targets, despite global yields rising as inflation “remains distant from our 2% target”.
    • South African inflation slowed more than expected in January with CPI rising 6.6% year-on-year, down from 6.8% in December.

    HIGHLIGHT

    The US Dollar index has risen after U.S. consumer price inflation jumped 0.6% on the month, and increased 2.5% year-on-year, due in part to higher gasoline prices. That's the fastest pace in nearly four years, and supports the case for another rate hike.

    US DOLLAR

    The Dollar is higher across the board following Yellen's comments and the stronger than expected inflation and retail sales data. U.S. retail sales came in above expectations for January, rising 0.4%, and December's were revised up to show a 1% increase.

    BRITISH POUND

    The Pound is lower again today, as concerns that consumer spending will slow as the pickup in inflation squeezes disposable income while wage growth is relatively weak. U.K. employment rose unexpectedly in December, as the labor market remained robust, though weaker average earnings are a concern as inflation accelerates.

    EURO

    The Euro is at a 1-month low against the US Dollar as the gap between Eurozone and U.S. interest rates widens, sending the single currency lower.

    CANADIAN DOLLAR

    The Loonie is lower against its rising U.S. counterpart, despite manufacturing sales jumping for a second consecutive month in December.

    AUSTRALIAN DOLLAR

    The Aussie Dollar continues to encounter resistance at 0.77 cents versus the US Dollar. Having strengthened overnight after consumer sentiment rose 2.3% in February, the Aussie is marginally down on the day.

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