Why bad inflation data sent stocks up and weakend the Dollar
Hi!
Today CPI (inflation data) was published.
The expectation was 3.1%, the real reading was 3.2%.
Normally, if inflation rises, the dollar gets stronger and stocks weaken. But why is that so?
To control inflation, central banks lift the interest rate. This causes people to bring their money to the bank to get interest revenue. Big players also do this. This decreases inflation (less money around) and weakens stocks. People rather get save money from interest rates then risk their money on the stock market.
Todays inflation was higher then expected, why did the Dollar drop and stocks move up?
well, the FED already talked about lowering the rates soon. Investors prepare for less interest so they withdraw their money from dollar assets to other currencies (dollar sinks) and invest their money in stocks (stock rise).
The inflation was just 0.1% higher then expected. this was simply not enough to prevent soon rate cuts.
If inflation would've been 1% higher then expected, FED most likely won't cut rates.
Today CPI (inflation data) was published.
The expectation was 3.1%, the real reading was 3.2%.
Normally, if inflation rises, the dollar gets stronger and stocks weaken. But why is that so?
To control inflation, central banks lift the interest rate. This causes people to bring their money to the bank to get interest revenue. Big players also do this. This decreases inflation (less money around) and weakens stocks. People rather get save money from interest rates then risk their money on the stock market.
Todays inflation was higher then expected, why did the Dollar drop and stocks move up?
well, the FED already talked about lowering the rates soon. Investors prepare for less interest so they withdraw their money from dollar assets to other currencies (dollar sinks) and invest their money in stocks (stock rise).
The inflation was just 0.1% higher then expected. this was simply not enough to prevent soon rate cuts.
If inflation would've been 1% higher then expected, FED most likely won't cut rates.
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