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 April 16? A Breakdown of Fundamental Events for Beginners

A few macroeconomic events are scheduled for Wednesday, but some important reports will be released. However, the current key issue is not the reports' significance but how the market will

Paolo Greco 07:06 2025-04-16 UTC+2

GBP/USD Overview – April 16: The Pound Sees No Limits

On Tuesday, the GBP/USD currency pair continued its upward movement. Although this rally was not as strong as last week's surge, the British pound kept rising steadily, with barely

Paolo Greco 03:35 2025-04-16 UTC+2

EUR/USD Overview – April 16: The Euro Stalls Awaiting New Tariffs

The EUR/USD currency pair mostly remained flat throughout Tuesday. Although both pairs are in an upward trend, the euro and the British pound have recently not been trading in sync

Paolo Greco 03:35 2025-04-16 UTC+2

EUR/USD. Gloomy ZEW Indices Put Pressure on the Euro

The euro reacted negatively to the ZEW indices released on Tuesday, which reflected growing pessimism in the European business environment. The key indicators dropped into negative territory for the first

Irina Manzenko 01:08 2025-04-16 UTC+2

The Euro Scared Itself with Its Own Momentum

The euro's surge to the area of three-year highs became possible thanks to Germany's fiscal stimulus, Donald Trump's trade policy, and a capital outflow from North America into Europe. When

Marek Petkovich 01:08 2025-04-16 UTC+2

XAU/USD. Analysis and Forecast

Today, gold is rising, trading near the all-time high reached the previous day, amid growing uncertainty surrounding the US-China trade wars. Gold is gaining ground today, remaining close

Irina Yanina 12:18 2025-04-15 UTC+2

USD/JPY. Analysis and Forecast

Today, the Japanese yen is struggling to extend its gains due to optimistic developments regarding trade negotiations and the postponement of tariffs. President Trump's statement about possible exemptions

Irina Yanina 12:08 2025-04-15 UTC+2

Trump Will Either Win or Lose. Is There No Middle Ground? (Potential Renewed Decline in #SPX and Bitcoin)

On Monday, markets calmed slightly amid Donald Trump's apparent backpedaling on the trade barriers he had imposed on America's trading partners. It gives the impression that the U.S. president

Pati Gani 09:46 2025-04-15 UTC+2

The Market Celebrates a Ceasefire

While there is still no peace in the trade conflict, a semblance of a ceasefire has appeared. The White House is beginning to frantically realize it has gone

Marek Petkovich 09:08 2025-04-15 UTC+2

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

Quite a few macroeconomic events are scheduled for Tuesday, but under the current circumstances, macroeconomic data mean little to the market. They might have a short-term local impact

Paolo Greco 06:29 2025-04-15 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.