DXY: US dollar index spikes after strong consumer inflation data

Written by: Crispus Nyaga
April 13, 2021
  • The US dollar index rose after the strong US CPI data.
  • The headline consumer CPI rose by 2.6% year on year.
  • The core CPI rose from 1.3% to 1.6%.

The US dollar index (DXY) rose after the latest US consumer inflation numbers. It rose to $92.26, which is slightly above last week’s low of $92.0.

US consumer inflation numbers

Consumer prices rose in March as the US continued to reopen. According to the Bureau of Labour Statistics (BLS), the headline consumer price index rose from 0.4% in February to 0.6% on a month-on-month basis. The prices rose from 1.7% to 2.6% on a year-on-year basis. This is higher than the 2.0% target of the Federal Reserve.

Are you looking for fast-news, hot-tips and market analysis? Sign-up for the Invezz newsletter, today.

In the same period, the core consumer inflation number that excludes the volatile food and energy products, increased from 0.1% to 0.3%. It rose from 1.3% to 1.6% on a year-on-year basis.

The US inflation numbers rose because of the ongoing vaccination drive that has led to the reopening of many states. As such, some activities that were muted in the previous months saw robust prices. Further, the prices of gas played a role as the price of crude oil rose. 

Most importantly, the recent $1.9 trillion stimulus package helped. The package saw many adults receive $1,400 stimulus checks. The package also included funds for states and local government and the enhanced unemployment insurance. 

While consumer prices have surged, the Fed has insisted that it will not hike interest rates in a bid to support the economy. Furthermore, the overall unemployment rate is at 6.0% and millions of Americans are out of work. Later today, several Fed members like Raphael Bostic and Esther George will talk and possibly mention the current policy. On Thursday, the dollar index will react to the latest US retail sales numbers.

The US dollar rose against all currencies in the index. It rose by 0.48% against the Canadian dollar, 0.25% against the Swedish krona, and 0.25% against the Swiss franc.

US dollar index technical outlook

US dollar index
US dollar index chart

The US dollar index has been in a downward trend after reaching a high of $93.42 early this year. Today, it is trading between the 23.6% and 38.2% Fibonacci retracement level. It has also moved below the 25-day and 15-day exponential moving averages. It has also formed a bearish flag pattern that is shown in green. Therefore, the index will likely break out lower as bears target the 50% retracement level at $91.55.