The US dollar index continued rallying on Monday morning as the strong inflation numbers pushed more people to worry about a recession. The numbers revealed that the country’s inflation jumped to the highest point since December 1981. This inflation trend happened as the cost of most items, including food and energy remained at elevated levels. Gasoline prices crossed the all-time high of $5 per gallon during the weekend. Therefore, a combination of high-interest rates, low unemployment rate, and high inflation signals that a recession could happen soon.
The British pound declined sharply ahead of key economic data from the UK. The ONS will publish the latest GDP numbers on Monday morning. Expectations are that the country’s economy continued weakening in April due to the rising cost of doing business. Analysts believe that the manufacturing and industrial production declined in April. The ONS will also publish the latest UK jobs this week. The most important catalyst for the pair will be the upcoming interest rate decision by the Bank of England. With inflation rising, analysts believe that the BOE will hike interest rates by another 0.25%.
US stock futures attempted to recover as concerns about the US economy remained. Futures tied to the Dow Jones and Nasdaq 100 rose slightly although they remain lower after they fell by 880 and 414 points on Friday. The key catalyst for these stocks will be the latest interest rate decision by the Federal Reserve. Analysts expect that the bank will hike interest rates and remain hawkish as it tries to fight inflation. The key companies to watch this week are Oracle, Kroger and Zebra Technologies.
The EURUSD pair declined sharply after the ECB decision and strong US inflation data. It dropped to a low of 1.0517, which was the lowest point since May 20. It moved below the ascending trendline shown in red and the 38.2% Fibonacci retracement level. The Relative Strength Index (RSI) moved below the oversold level. Therefore, the pair will likely continue falling as sellers target the key support at 1.0450.
The GBP/USD pair declined sharply due to the strong US dollar. The pair declined to a low of 1.2310, which was the lowest level since May. It managed to move below the important support at 1.2427, which was the lowest level since June 7. The pair also declined below the 23.6% Fibonacci retracement level while the Relative Strength Index (RSI) fell below the oversold level. The pair will likely continue falling in the coming days.
The XAUUSD pair rose to a high of 1,872, which was the highest level since June 6. It has moved along the upper side of the Bollinger Bands while the Stochastic Oscillator and the Relative Strength Index (RSI) are pointing upwards. The pair is also above the 25-day moving average. With inflation rising, the pair will likely keep rising as bulls target the key resistance at 1,900.