The US Dollar may continue to gain ground against its major counterparts in the near term, as a noticeable pickup in inflation fuels bets that the Federal Reserve may tighten its monetary policy levers sooner than expected.
The Fed’s preferred measure of consumer price growth – the Core Personal Consumption Expenditure (PCE) index – climbed 1.5%YoY in December, exceeding market estimates of a 1.3% print. The ISM manufacturing prices sub-index also surged unexpectedly, rising to 82.1 in January and smashing forecasts for a more conservative increase to 77.
Indeed, inflationary pressures may continue to build in the coming weeks, as Democrats pave the way for President Joe Biden to pass the majority of his proposed $1.9 trillion stimulus package with a simple majority.
