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USD Strengthens as March Consumer Price Index Softened on Eased Gas Price

USD Strengthens as March Consumer Price Index Softened on Eased Gas Price

Trang Nguyen,

THE TAKEAWAY: U.S. Consumer Price Index Rose 0.3 Percent in March> Soft Inflation may Encourage FOMC to Preserve its Zero Interest Rate Policy for a Prolonged Period of Time> USD Strengthens

U.S. overall inflation has softened in March after rising the most in ten months in February due to temporary jump in gasoline price, lending the FOMC more support to preserve its zero interest rate policy for a prolonged period of time.

The seasonally adjusted consumer price index for all urban consumers increased 0.3 percent last month, the U.S. Bureau of Labor Statistics reported today. The reading came in in line with economist’s expectations from the Bloomberg News survey. Over a year prior, the all items index fell back to 2.7 percent from 2.9 percent in February.

The gasoline index climbed 1.7 percent following its 6.0 percent February increase. Together with a rise in gasoline index, the fuel oil increase (+2.7%) and natural gas rally (+0.9%) pushed the energy index 3.2 percent higher. Meanwhile, the food index advanced 0.2 percent due to notable increases in meats, poultry, fish and eggs.

The so-called core index, which excludes food and energy, rose 0.2 percent in March from the previous month’s 0.1 percent increase. On the monthly basis, the core index advanced 2.3 percent in the month, higher than 2.2 percent projected. The rise reflected the widespread upsurge in prices of most of the major components last month, among which the indexes for shelter and used cars and trucks accounted for about half of total increase. Besides, the indexes for medical care, apparel, recreation, new vehicles and airline fares all picked up.

USDCAD 1-minute Chart: April13, 2012

041312_US_Consumer_Price_Index_March_body_Picture_1.png, USD Strengthens as March Consumer Price Index Softened on Eased Gas Price

Chart created using Strategy Trader – Prepared by Trang Nguyen

The U.S. dollar gains its footing versus most of its major peers except its New Zealand counterpart ahead of the opening bell in North America trade today. Since the inflation figures matched with economists’ expectation, market participations showed fairly muted reaction in the minutes following the release. As can be seen from the 1-minute USDCAD chart above, the currency pair traded in the tight range between 0.9935 and 0.9945 after the report. Additionally, the reserve currency still strengthens 0.46 percent against the Swiss franc and gains 0.44 percent against the single currency.

--- Written by Trang Nguyen, DailyFX Research Team for

To contact Trang, email

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.