The US dollar index or It is also known as DXY continued its sideways movement in the central area that is around 101.00-102.00. It was occured in trading on Wednesday (10/May), while major currency pairs fluctuated in limited ranges. 

The release of the inflation data in America triggers the speculation that the Fed's interest hike last week was the last in this year. It was then putting pressure on the US dollar rate. 

Besides that, a rumor and issue about debt ceiling in USA prevented a sharper weakening of the USD exchange rate. It was seen clearly from several data released. 

Growth in core data and inflation data as well for all groups of goods and services in that coubyry both rose by 0.4%. That was for month-over-month in April 2023, and not far difgerent to the expectation.

Inflationary Pressure is Not That Strong 

Core inflation on an annual basis corrected from 5.6% to 5.5%, while inflation for all goods groups also decreased 5.0% to 4.9%. Overall data indicate that inflationary pressures are weakening. 

The effect of tight monetary policy from Federal Reserve since last year has been widening in the economy. That is why; the central bank in America may not need to raise interest rates again. 

Yesterday’s United States inflation data is in line with expectations and does not change the economists view that Federal Reserve has now paused its rate hikes.

This opinion was stated by Karyne Charbonneau, economist at CIBC Capital Markets. The market made an early respond to the announcement of US inflation data. It was by boosting Wall Street stocks and releasing the USD. 

Democrat Wants the Higher Debt Ceiling 

US Treasury bond yields was known slipped slightly as well. However, market movements may moderate again as soon as possible due to the American debt ceiling issue which is warmer. 

Joe Biden and the political elites don’t reach an agreement to raise the government's debt ceiling yet in negotiations earlier this week. Democrats so far wanted the debt ceiling raised.

However, the Republicans refused that until there is agreement on other important issue. If an agreement about this debt ceiling is not reached by the June 1 deadline, that superpower country will default.

Besides that, its global financial markets could potentially be shaken. This risk creates market worry, making it quite positive for the USD in the short term period. 

NFP Increase Effect is Temporary 

When this news was written in the New York session, EUR/USD and AUD/USD continued their movement as well. It was below the thresholds of 1.1000 and 0.6800, respectively. 

GBP/USD made a one-year high level again, but also have not much energy to rally amid uncertainty ahead of the next Bank of England meeting. The weakening of the US Dollar became an opening for gold to stop the decline. 

The effect of the NFP increase of 253k in America turned is seemed only temporary. The market really only discounted the price of gold after last Friday's NFP report that is quite stronh. 

The precious metal was hit falling from its high levels, however it is managed to raise again. In line with recession risks, markets are preparing for the Fed's rate cuts. 

Gold is a Mostly Purchased Asset in Low Rate

In turn, this will encourage traders to use their capital in gold investments, as said by Daniel Ghali. Daniel is an analyst at TD Securities and known as an economic expert too. 

In June, 88% of respondents to CME's FedWatch Tool shares their expectation where the Federal Reserve must hold their rates. The estimated rate cut has even reached 33%. 

The outlook for policy easing was also supported by the Chicago Fed President. He said that the credit squeeze mood was approaching in the market. 

Gold will be a widely purchased asset in conditions of low interest rates. Tonight, too, the results of the Fed's lending survey will show how much the central bank is tightening their credit.