This week’s inflation cemented a trend that strategists had been anticipating for days: the US dollar (DX=F) is trending lower.
The greenback continued to slide on Thursday after falling to a 15-month low on the heels of the latest reading of the consumer price index. Data showed consumer prices in June rose at their slowest pace since March 2021.
“Inflation in the United States is falling faster than in Europe and Asia, and other central banks are behind the Fed in raising rates, so the dollar is depreciating against the euro and Asian currencies,” said Jay Hatfield, CEO of Infrastructure Capital Management. Yahoo funds.
The dollar’s trajectory is a reversal of its strength from last year. In September 2022, the Dollar Index (DX-Y), which measures the greenback against a basket of currencies, hit a 20-year high of 114. Today, it sits just south of 100.
It should be noted that moments of greenback weakness have been correlated with an increase in asset prices. American multinationals find it easier to sell their products and services abroad when the dollar is not so expensive.
“A big reason why we’ve been buying stocks so aggressively since last year, despite all the gloom and misfortune, is because of that weaker dollar,” JC Parets, chairman and founder, said recently. Allstarcharts.com, in a note to investors. .
Parets thinks stocks will struggle if the dollar strengthens later this summer or into the fall.
“There is little evidence, however, of a sustained dollar uptrend at this point,” Parets said. “In fact, the majority of the data continues to point to a lower US dollar. I think that could be the catalyst to keep stock prices higher. Bitcoin too.”
Another likely winner is commodities, which are denominated in dollars.
Still, one strategist says “so far the evidence is mixed” regarding the greenback’s potential impact on crude prices.
“Oil investors remain focused on the interplay between weak demand growth and OPEC and Russian production cuts,” Rob Haworth, senior investment strategist at US Bank Wealth Management, told Yahoo Finance at Yahoo Finance. Seattle.
“Higher real interest rates are undermining investor demand and offsetting the dollar,” he added.
West Texas Intermediate (CL=F) and Brent (BZ-F) futures both rose nearly 2% on Thursday.
Ines is a senior economics reporter at Yahoo Finance. You can follow her on Twitter @ines_ferre
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