Markets await US inflation after EUR/USD tests parity

The EUR/USD currency pair touches the parity level for a while; US CPI data eagerly awaited; The Reserve Bank of New Zealand raises interest rates by 0.50%; The Bank of Canada (BoC) is expected to raise rates today by 0.75%; Markets are in no-risk mode with a strong dollar

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The Brief: Today will be an active day in the markets as upcoming US CPI data will be closely watched for clues as to whether inflation has peaked and the potential for a recession.

  • The strong US dollar continues to advance, causing the EURUSD to briefly touch and parity test yesterday at $1,000, pushing the GBPUSD to a new 2-year low. The dollar later fell but started to rise again during the Asian session. This is a very strong trend in the forex market, so there is likely to be a good opportunity to trade the US dollar as long as the movement has a very strong momentum, although today’s release of US CPI data may cause unexpected volatility and price action later on. It seems that there is no stopping the dollar and fears that its rise will hurt the profits of US companies and increase pressure on the stock market.
  • The euro remains the weakest major currency. The weakness of the Euro is partly driven by fears that Russia will cut key energy exports to the European Union.
  • Stock and commodity markets fell sharply yesterday amid market sentiment towards risk-off, with the S&P 500 down nearly 1% in yesterday’s trading.
  • The Reserve Bank of New Zealand raised its official interest rate earlier today by 0.50% to 2.50%, which was widely expected.
  • Markets are looking forward to the crucial US CPI data on Wednesday, which will very likely be the main driver of the market this week. Yesterday, a White House spokesperson said Wednesday’s data is likely to be “extremely high,” indicating that the rate will sharply exceed the expected 1.1% monthly increase.
  • The Bank of Canada is expected to raise the overnight interest rate later today by 0.75% to 2.25%.
  • The number of new daily cases of coronavirus worldwide rose again for the third week in a row, due to the sub-mutant Omicron BA5.
  • It is estimated that 66.8% of the world’s population has received at least one dose of the coronavirus vaccination, while 7.1% of the world’s population has been confirmed to have contracted the virus at some time, although the true number is likely to be much higher.
  • The total number of confirmed new cases of coronavirus worldwide has reached more than 563 million with an average case fatality rate of 1.13%.
  • The rate of new coronavirus infections now appears to be increasing significantly in Bolivia, Belgium, Colombia, Croatia, Iceland, Lebanon, Montenegro, Slovenia, Switzerland, Albania, Austria, Brunei, Cyprus, France, Germany, Greece, Guatemala, Iraq, Italy, Japan, Mexico, New Zealand, Paraguay, Singapore and Tunisia.

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