The EUR/USD currency pair traded more calmly on Wednesday than it had on Tuesday, remaining relatively stable until the evening. There were no major fundamental or macroeconomic events in either the Eurozone or the U.S. throughout the day. We believe that even the U.S. inflation report published on Tuesday can no longer be considered highly significant under current conditions. More precisely, it remains important, but its influence on the Federal Reserve's monetary policy is no longer as significant as it once was. The Fed remains firm in its stance: first, it needs to understand how the finalized tariffs will affect key macroeconomic indicators, then it will make a decision on the key interest rate. Over the past three months, Jerome Powell has seemed to do little else besides publicly discuss inflation. The Fed Chair has repeatedly warned that the Consumer Price Index (CPI) is bound to rise if import prices increase by 20–30–40%. Especially when it comes to commodities and metals, which cannot be replaced as easily as consumer goods, now that June has arrived, we are indeed witnessing a rise in inflation. The CPI increased from 2.4% to 2.7% in June. This may not seem like a dramatic jump, but let us highlight two important points. First, Trump's tariffs began to influence inflation in June because, prior to that, American businesses had stockpiled goods at old prices for several months ahead and had neither raised prices nor placed new foreign orders. Therefore, the rise in June inflation is just the beginning. Second, on a monthly basis, CPI rose by 0.3%, which translates to an annualized rate of 3.6%. Powell and his colleagues suggest that the inflationary shock might be short-lived and that consumer prices may "stabilize" once final tariff rates are set. But what kind of stabilization can we expect when Donald Trump has signed only 3 out of 75 trade agreements, has prepared new tariff hikes for 24 countries starting August 1, and introduced 50% tariffs on pharmaceuticals and copper? This means that average U.S. import tariffs will rise even further from August 1, and even those will not be final. So, if inflation is already acceler
Analysis are provided by InstaForex.
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