Consumer prices in the United States posted their smallest overall year-over-year gain since June 2021, increasing just 2.4 percent compared to last year in May. The US Bureau of Labor Statistics just put out this information as part of Completing the Department of Labor Recovery. Unfortunately, that was not enough to overcome a sizable miss on economists’ expectations. That was still below what analysts had expected—a much larger 0.6 percent uptick—which fueled worries over the direction that inflation in the country is headed.
Consumer Price Index (CPI) registered a 2.4% YoY increase in May. The so-called core CPI, which strips out food and energy prices, was up just 2.8% from a year earlier. That 0.1 percent increase in core CPI was a tick below consensus expectations, a continuing sign that inflationary pressures may be cooling.
Key US inflation readings were released to the public on Wednesday, provoking knee-jerk reactions in financial markets. The US Dollar had a very bearish reaction after the release of these below-expectations inflation prints. As a result, GBP/USD currency pair accelerated and approached the 1.3540 level. At the same time, the EUR/USD exploded to 2-month highs near 1.1470.
“US headline CPI came in at 2.4% YoY in May – LIVE” – FXStreet
Market analysts are playing a close eye to these developments, as they will likely affect the Federal Reserve’s forthcoming monetary policy actions. The easing inflation numbers could be a sign that any future interest rate hikes should come more cautiously.
Gold prices further responded bullishly to the hottest inflation print, with prices recovering back up towards the $3350 level per troy ounce. In looking at the five-year chart, the yellow metal has obviously engaged in a bottoming process at this level. Geopolitical jitters and economic uncertainties are fueling its strength.
“Gold appears bid near $3,350 after US inflation” – FXStreet
It must be said that investors are reading the new economic numbers with a fine-toothed comb. They monitor all indicators for any changes in consumer expenditures and inflation defense. The dollar continues on a downward path, pushing up gold prices. This change in market sentiment has traders adjusting their bet as they continue to adapt amid a rapidly changing economic landscape.