Wall Street in the red after the highest inflation in 40 years in the US; dollar in Uruguay fell again

The main US stock indices opened lower on Thursday dAfter the inflation data in the US was the highest in 40 years. Both the Dow Jones, the S&P500 and the Nasdaq start Thursday in negative territory, with respective falls of 1.2%, 1.4% and 1.8%, respectively.

The weakness in stocks comes after news that US inflation accelerated to an annual rate of 7.5% in January, reaching a new 40-year high. The consumer price index rose 0.6% in January, versus 0.5% expected by the market. Core prices also rose 0.6%.

High inflation reinforces the idea that the economy is overheated, which implies a greater challenge for the Federal Reserve (Fed) when it comes to combating price increases without generating a recessive process. The market sees that higher inflation will force the Fed to raise the rate at a faster pace, thus implying a risk for stocks in the short term.

“This is not encouraging news for the Fed in its battle to get inflation back to the 2% target,” said James Knightley, chief international economist at ING. On the news of accelerating inflation, the odds that the Fed will raise the rate by 50 basis points at the March meeting have risen to 45%.

Based on an expectation that the Fed is going to raise the rate, all sections of the American sovereign curve move upwards. The 10-year Treasury bond stands at 2.04%, its highest value in two years. Similarly, shorter yields are also trading higher and are at their highest level in two years. The 2-year Treasury yield has doubled since the beginning of the year, from 0.73% to 1.47%.

In Uruguay, the dollar continued to fall

It was another day of fall for the exchange rate in the Uruguayan exchange market, although in a more moderate way than the two previous days. The interbank dollar was traded in the average of transactions at $43.18, with a depreciation of 0.12% against the Uruguayan peso; the last operation was agreed at $43.16, according to Bevsa. In total, US$ 25.1 million were traded and there was no intervention by the Central Bank of Uruguay (BCU) in the spot market.

On the BROU public board, the dollar was at $41.95 for purchase and $44.35 for sale, unchanged compared to Wednesday. In the year to date, the US currency depreciated 3.4% against the peso.

In Brazil, the dollar operated in the opposite direction this Thursday and appreciated 0.3% against the real, to 5.24 units, while in Argentina the blue dollar fell 0.7%, to 215.5 Argentine pesos per greenback.

With El Cronista-RIPE

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