The U.S. Dollar Index, which tracks the performance of the U.S. Dollar against six significant currencies, has remained relatively stable following the release of the United States Consumer Price Index (CPI) for February. Both the yearly and monthly figures for core and headline inflation came in below expectations, suggesting that inflation continued to decelerate in February, prior to the tariffs imposed by U.S. President Donald Trump at the beginning of March.
On the geopolitical front, China has reiterated its commitment to retaliate against U.S. tariffs, while Europe is preparing to implement countermeasures, as announced by European Union leader Ursula Von Der Leyen on Wednesday. In related news regarding the Ukraine-Russia conflict, a ceasefire agreement is under consideration after Ukraine consented to a deal brokered by the U.S. The next move now lies with Russia, which must decide whether to support or reject the agreement.
February CPI report insights
The February CPI report revealed that monthly headline inflation registered at 0.2 percent, falling short of the 0.3 percent consensus and down from 0.5 percent in January. Core inflation also eased to 0.2 percent, slightly lower than the anticipated 0.3 percent and down from 0.4 percent in the prior month. The yearly headline inflation rate was recorded at 2.8 percent, just beneath the 2.9 percent consensus and down from 3.0 percent in January. The core measure declined to 3.1 percent, below the 3.2 percent estimate and down from 3.3 percent in the previous month. This notably softer inflation reading is expected to boost bets for rate cuts by the U.S. Federal Reserve, likely leading to another decrease in the U.S. Dollar.
Treasury market reactions
Treasuries experienced a decline during a volatile trading session, as a recovery in risk sentiment amid the escalating global trade war overshadowed a cooler-than-expected US inflation report.
The two-year yield, which reflects traders’ expectations for Fed policy, fell as much as four basis points to a session low of 3.90 percent, before rebounding to a high of 4 percent. The 10-year yield also fluctuated significantly, rising as high as 4.33 percent.
Stock market performance
Meanwhile, the S&P 500 Index increased by 0.5 percent, driven by megacap tech shares, after oscillating between gains and losses following the release of consumer price data. The consumer price index rose at the slowest pace in four months in February, although tariffs are anticipated to raise prices on certain goods.
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