FX.co ★ Gold did not react to U.S. inflation

The U.S. consumer price index (CPI) at 7.9% coincided with market expectations, which predicted an increase in price pressure after a very tense geopolitical situation in Ukraine. The most recent data follows a 7.5% year-on-year increase in January.

After the news about inflation, which rose to 7.9% in February, remaining at a 40-year high, the instruments reacted differently to this event.

Reacting immediately to the data, gold surged to daily highs but failed to sustain the gains and plunged below $2,000 an ounce.

The EURUSD pair rose at the moment, but then the quotes decreased throughout the American session:

On a monthly basis, the core index rose 0.8% in February after rising 0.6% in January, according to the U.S. Department of Labor.

Compared to last year, core inflation, which excludes food and energy price volatility, accelerated to 6.4%. Monthly growth justified market expectations, adding 0.5%.

The largest price increases were recorded for gasoline, food, and housing. In February, the gasoline index rose by 6.6% and amounted to almost a third of the monthly increase in all positions. Other indicators of the energy component were mixed. The food index rose 1.0 percent. These are the highest numbers since April 2020.

February inflation data is the last decisive data before the Federal Reserve meeting. Last week, U.S. Fed Chairman Jerome Powell testified that despite the economic uncertainty associated with geopolitics in Ukraine, he would support the traditional 25 basis point rate hike.

According to CIBC Capital Markets economist Katherine Judge, given economic consumer price data reflecting a spike in energy prices and renewed disruptions to the supply chain due to geopolitical tensions, the Fed does not need to stretch rate hikes by 25 basis points four times a year.