🔍 Current inflation situation:
With US inflation stabilizing at 2.4% in May 2025, and expectations for it to rise to 2.6%-2.9% by 2026 due to tariffs and demand, global currencies are significantly affected. Here are the main impacts:
📈 US Dollar (USD): Current strength: Stable inflation above the Fed's target (2%) supports the dollar, as it reduces the likelihood of interest rate cuts soon. The Dollar Index (DXY) hovers around 108.5.
Powell's impact: Jerome Powell's cautious remarks on inflation reinforced expectations of continued tight monetary policy, strengthening the dollar against other currencies.
Tariffs: A 10% tariff on imports supports the dollar in the short term due to expectations of rising domestic prices.
📉 Euro (EUR): Downward pressure: High US inflation compared to the Eurozone (where inflation is around 1.8%) weakens the euro. The EUR/USD pair is trading around 1.0450, near its lowest levels in 2025.
European Central Bank policy: Expectations for monetary easing in Europe with slowing growth further weaken the euro against the dollar. 💷 British Pound (GBP): The pound faces similar pressures, with GBP/USD trading around
.2650. Inflation in the UK is at 2.1%, but the divergence in monetary policies with the US limits gains for the pound.
💴 Japanese Yen (JPY): Weak currency: High US inflation enhances the interest rate differential between the US (4.5%-4.75%) and Japan (0.25%), weakening the yen.
The USD/JPY pair is approaching 155.
Potential interventions: The Bank of Japan may intervene if the yen exceeds levels of 160, but the impact is temporary.
🌏 Emerging market currencies: Currencies like the Turkish lira and Brazilian real are suffering from weakness due to a strong dollar and the impact of US tariffs.
US inflation increases the cost of imports for these countries, putting pressure on their currencies.
For example, USD/TRY is trading above 65.00.
🪙 Cryptocurrencies (BTC/USD): High US inflation reduces Bitcoin's appeal as a safe haven temporarily; following Powell's statements, Bitcoin dropped to around $94,000. In the long run, inflation may support cryptocurrencies if investor confidence in the dollar wanes.
📊 Market outlook: If US inflation continues to rise, the dollar will remain dominant, weakening other currencies.
Any unexpected rate cuts from the Fed may reverse this trend, but they are unlikely before mid-2025. Currency movements will depend on upcoming inflation data and Fed comments. #inflation #currencies #dollar #اقتصاد_عالمي
