Accelerating US inflation weighs on stocks, strengthens USD
The US consumer price index accelerated by 8.6% in May from 8.3% a month earlier. The new data exceeded expectations, rebutting hopes that US inflation is already slowing.
Today's inflation report is the last big release before the Fed meeting next Wednesday. A renewal of inflation to 40-year highs will surely attract the public's attention at the weekend and will pressure the Fed.
Potentially, such high reading could trigger a tougher FOMC stance in the accompanying commentary. Recently, the Fed has been expected to raise rates by 50 points next week and hints of another such move in late July.
However, with a strong labour market and persistently high inflation, there are increasing chances that more such double-sized rate hikes are required, which is speculatively good news for the dollar in the coming weeks.
