The US dollar index or it is known as DXY rose after the release of United States inflation data yesterday. However, it is still within the consolidation range formed last week. 

When the news was written in the Asian session on Wednesday (15/February), Dixie was circulating in the 103.40s. Actual U.S. inflation data exceeded consensus estimates.

However, its continued the downward trend. As a result, this data was able to support the USD but could not trigger a significant rally in the market. 

The US Bureau of Labor Statistics reported that the consumer price index increased by 0.5% For month-over-Month in January 2023. That was higher than the 0.1% increase in the previous period. 

Core Inflation was Lower

However, the growth was mainly due to the increase in volatile fuel prices only. The core consumer price index increased by 0.4% For month over month in the same period. 

It was aligned with consensus estimates and the same as in previous periods. The annual inflation rate showed a higher increase than estimated, but decreased compared to the previous period. 

Core inflation was 5.6% in January, down from 5.7% in December. Meanwhile, major inflation growth stood at 6.4% for year over year in January, lower than 6.5% in December.

It became the lowest annual inflation release since October 2021 for this superpower country. Thus, although the numbers exceeded estimates, the data is not expected to disrupt the Fed's interest rate expectations. 

USD will Remain Strong in a Short-Term Period 

Athanasios Vamvakidis, a head of global G10 FX strategy at Bank of America, said, inflation in America is clearly inherent. This will keep Fed policy on track, keeping the US dollar strong , but not necessarily becoming stronger. 

The big picture is that inflation data clearly shows that the market is overestimating a drop in inflation this year to expect that cut to allow the Fed to cut rates.

The market is obviously likely to put a short position on the dollar for the first half of the year, as said byErik Nelson, Wells Fargo macro strategist. However, with CPI figures like this and recent activity data, it will be difficult for the dollar to continue to sell. 

He also think that that US dollar will remain relatively strong in the short term. Market participants are now looking forward to the release of the American retail sales report later in the evening.

DXY Skyrocketed for about 0.75%

The situation above is as well as producer inflation and other data sets that will be published tomorrow. The search for the next catalyst for the US dollar is still continuing.

Meanwhile, the retail sales data in America provided a positive catalyst for the US dollar rate in New York session trading on Wednesday The USD index or DXY skyrocketed about 0.75% to touch 104.06.

This currency was scoring its strongest rate since early January. The United States Census Bureau reported that retail sales increased by 3.0% month over month in January 2023.

It was nearly double the 1.8% consensus estimate. The data "made up" for the decline of -0.7% in the previous period, while also curbing annual retail sales growth from 5.89% to 6.38%. 

Core Retail Sales Data has a Good Performance 

Core retail sales data also performed well. Monthly growth reached 2.3%, which is three times better than the estimate of only 0.8%. This indicates that public demand for basic necessities such as food remains high.

It is especially amidst the rising interest rates and US inflation. The United States dollar briefly climbed cautiously in early trading today, as yesterday's consumer inflation data presented an ambiguous situation. 

However, inflationary pressures going forward will remain high as long as labor market conditions and public spending interest are tight as they are today. Consequently, the release of retail sales data boosted the Fed's interest rate expectations.