While the banking crisis that broke out in the USA strengthened the expectations that the FED will put the brakes on monetary tightening, there was a serious decline in the dollar index.
However, for the FED to apply the brakes, economic data from the US will have to support this. For this reason, investors are closely following all the data coming from the USA that will signal the change in inflation.
Data on the US personal consumption expenditures price index were released today.
According to this:
US personal consumption expenditures price index (annual) Announced: 5% Expected: 5.1%
US personal consumption expenditures price index (monthly) Announced: 0.3% Expected: 0.5%
First reaction of bitcoin and dollar:
What is the personal consumption expenditures price index?
The personal consumption expenditures price index is an indicator of the average increase in prices in all personal consumption expenditures across the USA. The effect of this data on the dollar can be twofold. Therefore, it should be evaluated together with other conditions.
An increase in the Consumer Price Index can lead to a rise in interest rates and currency; On the other hand, an increase in CPI during a recession may cause a deepening of the recession and therefore a decline in the dollar.
The fact that the incoming data was below expectations revealed that the inflation in personal consumption goods continued to decrease. Therefore, while DXY fell, the upward movement in risky assets continued. The fact that inflation continues to fall in many items continues to strengthen the FED's decision to put the brakes on monetary tightening.