Scrutiny of US Inflation report shows a different story

The US Dollar remained a major victim on Wednesday after US Consumer Price Index (CPI) softens more than expected and Fed policymakers anticipated a mild recession ahead, which would propel a dial back of quantitative easing. However, a scrutiny of US inflation is telling a different story. The US CPI report indicates that headline inflation has softened more than expectations to 5.0% vs. the former release of 6.0%. A deceleration in headline inflation was the outcome of weaker gasoline prices. The investing community is aware of the fact that oil prices have significantly rebounded in April after a surprise announcement of production cuts by OPEC , which could spoil Gold Bull’s party in the coming months.

Speaking on the headline inflation, core CPI has rebounded to 5.6%  as expected vs. 5.5% the former release as rent prices remained persistent. This indicates that core inflation could remain extremely stubborn ahead.

It would be early to consider a pause in the Quantitative tightening spell as inflation is still far from the desired target of 2%. San Francisco Fed Bank President Mary Daly said late Wednesday, "There's a lot more in the pipeline of monetary policy tightening," as reported by Reuters. However, she refrained from forecasting the end of the tightening cycle.