Author: Amar – Technical Analyst

The January data was showing a 7.5%, an increase of 0.5% from last year rate, lift in prices which spooked markets yesterday. On a core basis, inflation lifted 6.0% after gaining 0.6% during January. Both the core and headline inflation were stronger than expected and was a concern to Fed’s James Bullard, who wants a full percentage point of interest rate hikes over the next three central bank policy meetings. He even said the Fed could rate hike san inter-meetings and some Fed watchers have taken that to mean that there could be an emergency meeting and subsequent rate hike before the March meeting.

The dollar index, a gauge of the greenback’s value against six major currencies, initially rose almost 0.5%. It then slumped 0.4% and ended almost flat. It was last up 0.08%. Higher interest rates typically would lift the dollar, but the market is already sufficiently long dollars. Chances of a 50-basis point interest-rate hike rose to more than the likelihood of a 25-basis point increase as was expected before. The market also considered how other central banks will fight inflation that’s on the rise globally, driven especially by rising commodity prices.