US inflation data showed price growth of zero percent in October 2023, hitting the US dollar in all major currency pairs.
The greenback suddenly collapsed in early New York session trading on Tuesday (14/November) on the back of disappointing US inflation data. The US Dollar Index (DXY) fell more than 1.1% to 104.46 at the time of writing. Various other majors are rallying to higher ranges.
US inflation data showed price growth of 0.0% in October 2023, while the annual inflation rate slipped from 3.7% to 3.2%. Core inflation data also slowed faster than expected with growth of just 0.2% monthly, and 4.0% on an annualized basis.
Experts are unanimous in their view that this data marks the end of the era of rising US interest rates. With inflation trending downward, the Fed will only keep the current interest rates on hold for the next few months. The data also raises the possibility of an early Fed rate cut period next year.
"You can say goodbye to the rate-hiking era," said Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin.
The market reacted strongly to the US inflation data. The 2Y and 10Y US Treasury bond yields fell by around 0.2% each. On the other hand, the Dow Jones, S&P 500, and Nasdaq Composite indices jumped more than 1% immediately after the opening of Wall Street exchanges.
AUD/USD and NZD/USD were the champions in the forex market, each increasing more than 1.65% to their highest levels in a week. GBP/USD followed with a gain of more than 1.5%, also getting a boost from the UK wage data that came in during the European session. EUR/USD was next with a gain of around 1.3% to its highest level since early September at 1.0840s.
USD/JPY collapsed by more than 0.6% to the 150.70s. Some analysts anticipate the pair will struggle to break the 151.90-152.00 threshold in the short term.
The USD/JPY duo was also affected by the expiration of multi-billion dollar options contracts this week. Options worth over $1.3 billion with a strike price of around 152.00 expired yesterday, requiring traders to close their trading positions near that range - effectively stemming the USD/JPY rally. There are still options contracts worth around $3.5 billion with strike prices between 151.90-152.00 that will expire on Wednesday through Friday. After that, there are $2.2 billion worth of contracts with the same strike price expiring between November 20 and the end of the month.