USD at its 2021 high after US inflation hit its 30-year high

USD hit its annual high so far against GBP and EUR early Thursday morning in Asia. According to the latest news, US inflation has jumped to its highest point since 1990. On a monthly basis, CPI rose by 0.9%. On an annual basis, CPI rose by 6.2%, which is well above analysts’ expectations at 5.8%. The news on inflation came after the Biden administration and the Fed tried to downplay rising costs, arguing that they were only transitory. The Fed believes that the supply chain constraints under COVID have brought up prices for everything. Indeed, prices on energy, shelter, food, used cars, and new vehicles have all increased heavily. Energy prices are up 30% on a year ago, while food is up 5.3%.

Investors are betting that the high inflation would trigger an early-than-expected interest rate hike. On the other hand, ECB is seen lagging on policy tightening, leading EUR to slip further to its lowest since July 2020. Currently, EURUSD is trading at 1.1479.