EUR teaches us to be confident. Overview for 13.04.2023

EURUSD on Thursday remains strong. The current quote is 1.0990.

In fact, it is not the EUR that is astonishingly strong, it is the USD that is extremely weak.

A serious reason for such a decline in the USD has become the inflation report for March. The CPI dropped to 5.0% y/y, which is even better than the forecast 5.2%. Inflation in February amounted to 6.0% y/y. Month by month, the CPI grew by 0.1% against the 0.2% forecast and 0.4% previously.

All this is good. However, base inflation in March remained growing by 0.4%. Year by year, this figure somewhat exceeded the February one. As long as base inflation, though calculated a bit differently, is what the Federal Reserve System cares for, the situation looks more cautious.

More modest inflation figures have supported the expectations that the Fed will go on softening its interest rate policy. Now investors think that the May meeting will be the last one where the regulator will lift the rate. All this applies pressure on the USD.

The minutes of the Fed meeting published yesterday demonstrate that even on that occasion the regulator considered a pause in lifting the interest rate. However, the decision was made to go on fighting inflation. And now the CPI confirms that it is time to wind up the tight credit and monetary policy.