USD Surrenders against Major Currencies on Soft Inflation Data

The USD is softer against the majors and exotic currencies after the headline consumer price index (Inflation) from the United States Labor Department came as expected. In February, CPI rose 0.4 percent, building on January's slight increase of 0.3 percent. Accordingly, the USD remains limited to the upside. It is much to the disappointment of bulls who anticipate higher headline inflation readings from now on in line with the government's approval of even more stimulus data. At the same time, the FED maintains an accommodative monetary environment, triggers for inflation.

Details: 

The greenback might be relatively weaker versus peers but remains firmly in an uptrend. Additionally, streams of supportive economic data from the United States, improving coronavirus administration, the Senate's approval of the $1.9 trillion stimulus package, and investors expecting an accelerated economic recovery pace provide the much-needed impetus for the USD. For this, Wells Fargo's analysts are revising their USD outlook modestly higher, anchoring their bullish assessment on stronger economic conditions and rising treasury yields.

Impact on the USD Price: 

Bullish. The greenback has been on an uptrend in the last month, which might continue in the coming weeks. Additional support from the U.S. government, improving macroeconomic conditions, and an influx to the greenback all support the march higher. The FED, despite inflation fears, will highly likely remain accommodative, thereby accelerating growth.

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