Inflation in the United States, measured by the variation in the price index of personal consumer expenditure (PCE), fell to 2.3% on an annual basis in March, compared to 2.5% in February, reported the US Economic Analysis (BEA) on Wednesday. This reading came above the market expectation of 2.2%
The basic PCE price index, which excludes the volatile prices for food and energy, increased by 2.6% during the same period, down compared to the 3% increase reported in February and in accordance with the estimates of analysts. The basic PCE price index was unchanged on a monthly basis.
Other details of the report have shown that personal income and personal expenses increased by 0.5% and 0.7%, respectively, on a monthly basis in March. These two figures have been better than investor expectations.
Market reaction to PCE inflation data
The US dollar index holds its ground after the PCE inflation report and was last seen increasing by 0.35% per day to 99.52.
US dollar price today
The table below shows the percentage of variation in the US dollar (USD) compared to the main currencies listed today. The US dollar was the strongest against the British book.
| USD | Eur | GBP | Jpy | Goujat | Aud | Nzd | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.26% | 0.72% | 0.31% | 0.10% | 0.38% | 0.49% | -0.10% | |
| Eur | -0.26% | 0.47% | 0.03% | -0.16% | 0.12% | 0.24% | -0.34% | |
| GBP | -0.72% | -0.47% | -0.44% | -0.62% | -0.33% | -0.23% | -0.82% | |
| Jpy | -0.31% | -0.03% | 0.44% | -0.22% | 0.07% | 0.23% | -0.39% | |
| Goujat | -0.10% | 0.16% | 0.62% | 0.22% | 0.29% | 0.39% | -0.18% | |
| Aud | -0.38% | -0.12% | 0.33% | -0.07% | -0.29% | 0.10% | -0.48% | |
| Nzd | -0.49% | -0.24% | 0.23% | -0.23% | -0.39% | -0.10% | -0.58% | |
| CHF | 0.10% | 0.34% | 0.82% | 0.39% | 0.18% | 0.48% | 0.58% |
The thermal map shows the percentage of variations in the main currencies against each other. The basic currency is chosen in the left column, while the quotes motto is chosen in the upper row. For example, if you choose the US dollar in the left column and move along the horizontal line to the Japanese yen, the percentage of variation displayed in the box will represent USD (base) / JPY (quote).
Inflation FAQ
Inflation measures the price increase in a basket representative of goods and services. The inflation of the titles is generally expressed as a percentage of variation on a monthly basis (MOM) and in annual sliding (yoy). Central inflation excludes more volatile elements such as food and fuel that can fluctuate due to geopolitical and seasonal factors. Central inflation is the figure on which economists are concentrated and are the level targeted by central banks, which are mandated to maintain inflation at a manageable level, generally about 2%.
The consumer price index (ICC) measures the variation in the prices of a basket of goods and services over a period of time. It is generally expressed as a percentage of variation on a monthly basis (MOM) and in annual sliding (yoy). The central ICC is the figure targeted by central banks because it excludes volatile foods and fuel entries. When the central ICC exceeds 2%, it generally translates into higher interest rates and Vice Versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation generally results in a stronger currency. The reverse is true when inflation drops.
Although it may seem counter-intuitive, high inflation in a country increases the value of its currency and vice versa for lower inflation. Indeed, the central bank will normally increase interest rates to combat higher inflation, which will more attract the world's capital entries in search of a lucrative place to park their money.
In the past, gold was the investors of the active ingredients shot during periods of high inflation because it preserved its value, and while investors will often buy gold for its package properties of market turbulence, this is not the case most of the time. Indeed, when inflation is high, central banks display interest rates to fight it. Higher interest rates are negative for gold because they increase the opportunity cost to maintain gold vis-à-vis an active ingredient with interest or place money in a cash deposit account. On the other hand, the drop in inflation tends to be positive for gold because it lowers interest rates, making shiny metal a more viable investment alternative.
