EUR/USD: Dollar strengthens on higher inflation numbers

By FXstreet.com | Updated July 30, 2014 AAA

FXStreet (London) - The dollar strengthened against the euro following stronger-than-expected inflation numbers.

The US Bureau of Labor Statistics reported that the Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4 percent in May on a seasonally adjusted basis. Year-on-year, the all items index increased 2.1 percent before seasonal adjustment.

Tapering to maintain pace

The inflation data came in at twice the consensus expectation of a year-on-year increase of 0.2 percent. The data comes as the US Federal reserve begins its twp-day meeting at which it will discuss the pace of its plans to taper is monthly asset purchase programme. It is expected that tomorrow the central bank will announce that it will be slowing its rate of monthly asset purchases by USD10bn to USD35bn.

The rise in inflation, closer to the Fed’s 2 percent goal, suggests that the Fed may move to hike rates earlier than had been forecast and increases bets that the Bank will continue with its current pace of cuts to its asset purchase programme.

EUR/USD is currently trading at USD1.3543, falling to a session low of USD1.3538 after being range-bound ahead of the BLS data release. The pair is down 0.21 percent on the session.

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