Annual inflation hitting rates last seen four decades ago

• The U.S dollar dipped on Friday, giving back some of the strong gains from the previous day
• The greenback on Thursday notched its biggest one-day percentage gain since Nov. 10
• U.S inflation data seen as unlikely to make the Fed overly aggressive at its next policy meeting
• U.S President hit Russia with a wave of sanctions following that country's invasion of Ukraine

The U.S. dollar dipped on Friday, giving back some of the strong gains from the previous day, as investors gauged the latest round of sanctions on Russia and U.S. inflation data was seen as unlikely to make the Federal Reserve overly aggressive at its next policy meeting. 

The greenback on Thursday notched its biggest one-day percentage gain since Nov. 10 to reach 97.74, its highest since June 30, 2020. However, it gave back some gains after U.S. President Joe Biden hit Russia with a wave of sanctions following that country's invasion of Ukraine, but refrained from imposing sanctions on Russian President Vladimir Putin and disconnecting Russia from the SWIFT international banking system.

U.S. economic data showed consumer spending increased more than expected in January even as price pressures mounted, with annual inflation hitting rates last seen four decades ago, although the personal consumption expenditures price index increased 0.6% in January after rising 0.5% in December.

Economic Calendar

The revisions to income and spending data shows the economy was very resilient to Omicron and to high oil prices. Hopefully, the situation with Russia is short-lived, but even if oil prices stay elevated, the economy should have enough fundamental strength to tolerate high energy prices. 

The inflation numbers weren’t great, but at least the month-on-month inflation numbers aren’t moving higher. That should take some wind out from under the wings of the most hawkish Fed members. The dollar index fell 0.459%, with the euro up 0.59% to $1.1257. The euro fell to $1.105 on Thursday, its weakest against the greenback since June 1, 2020. Even with Friday's pullback, the dollar was still on track for a third straight week of gains. Before Thursday's jump -- which sent the dollar to its highest level since June 30, 2020 -- the greenback had been subdued in recent weeks, as rising tensions in Ukraine fueled expectations the Fed may be less aggressive in tightening policy as it attempts to rein in inflation. Expectations for at least a 50-basis-point interest rate hike at its March meeting have fallen to 25%

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Euro

The single currency sank more than 1% after Western nations announced a harsh set of sanctions to punish Russia for its invasion of Ukraine, including blocking some banks from the SWIFT international payments system. Russian President Vladimir Putin ordered his military command to put nuclear-armed forces on high alert on Sunday. Overall, the EUR/USD traded with a low of 1.1274 and a high of 1.1273 before closing the day around 1.1271 in the New York session.

Yen

The Japanese Yen gained as the U.S dollar dipped, giving back some of the strong gains from the previous day, as investors gauged the latest round of sanctions on Russia and U.S. inflation data was seen as unlikely to make the Fed overly aggressive at its next policy meeting. U.S economic data showed consumer spending increased more than expected in January. Overall, the USD/JPY traded with a low of 115.12 and a high of 115.74 before closing the day around 115.52 in the U.S session.

British Pound

The British Pound traded lower as the UK consumer confidence survey, compiled by Gfk recorded its sharpest month-on-month drop in February since the start of the pandemic. The figure has been trending lower since November and dropped from -19 to -26. UK consumers expressed concern over energy and food price rises. Overall, the GBP/USD traded with a low of 1.3364 and a high of 1.3471 before closing the day at 1.3411 in the New York session.

Canadian Dollar

The Canadian Dollar strengthened as domestic data showed wholesale trade rising in January and currency traders walked back some of the large moves seen the day before in reaction to Russia's invasion of Ukraine. The price of oil, one of Canada's major exports, gave back some recent gains, with U.S crude oil futures falling 1.1% to $91.76 a barrel. Overall, USD/CAD traded with a low of 1.2692 and a high of 1.2818 before closing the day at 1.2702 in the New York session.

Australian Dollar

The Australian Dollar took a knock today as the escalating crisis in Ukraine clouded the outlook for global growth and inflation, overshadowing strength in Australian economic data. Higher commodity prices were supporting the Aussie given Australia was a net energy exporter, though record petrol prices at home will act as a tax on consumers and add to inflation concerns. Overall, AUD/USD traded with a low of 0.7138 and a high of 0.7235 before closing the day at 0.7231 in the New York session.

Russian rouble plunged to a record low after Russia launched an invasion of Ukraine

Euro-Yen

EUR/JPY is trading below 14, 50 and 100 days moving average. Fast stochastic is giving a bearish tone and MACD is also issuing a bearish stance. The Relative Strength Index is above 40 and lies below the neutral zone. In general, the pair has gained 0.73%.

Sterling-Yen

Currently, GBP/JPY is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bearish tone and MACD is also indicating a bearish stance. The Relative Strength Index is above 42 reading and lies below the neutral zone. On the whole, the pair has gained 0.30%.

Aussie-Yen

Currently, the cross is trading above 14, 50 and below 100 days moving average. Fast stochastic is giving a bearish tone and MACD is also indicating a bearish stance. The Relative Strength Index is above 54 reading and lies above the neutral region. In general, the pair has gained 1.01%.

Euro-Sterling

This cross is currently trading above 14, 50 and below 100 days moving average. Fast stochastic is indicating a bullish tone and MACD is also issuing a bullish signal. The Relative Strength Index is above 46 and lies below the neutral region. Overall, the pair has gained 0.44%.

Sterling-Swiss

This cross is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bearish stance and MACD is also indicating a bearish tone. The Relative Strength Index is above 40 and lies below the neutral region. In general, the pair has gained 0.26%.

February has proved to be the perfect storm for gold - with inflation, falling stock markets, and geopolitical uncertainty

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