Inflation fails to lift dollar, consumer confidence, infrastructure news eyed

Markets sustain the upbeat mood and the dollar remains range-bound despite strong inflation numbers. The focus shifts to US Consumer Confidence as well as potential progress in bipartisan talks. A delay of the UK’s reopening is weighing on sterling, oil extends its gains and cryptocurrencies are consolidaing.

The S&P 500 Index hit yet another record high on Wednesday as investors shrugged off fears the jump in headline inflation to 5%, the highest since 2008. Markets seem convinced that the Federal Reserve would see through rising prices and continue labeling inflation as transitory.

US 10-year bond yields tumbled well below 1.50%, dragging the dollar down with them.

A bipartisan group of US senators has reached a $1.2 trillion accord on infrastructure spending that does not include tax hikes. President Joe Biden is touring Europe and is yet to give his blessing to the deal. Further details may come out on Friday.

EUR/USD is changing hands near 1.22 despite the European Central Bank’s decision to keep the pace of bond buying elevated. ECB President Christine Lagarde said that it is premature to talk about exiting the QE program. The bank also upgraded its growth forecasts, as expected.

GBP/USD is hovering under 1.42 amid ongoing Brexit acrimony and reports that Prime Minister Boris Johnson will delay the reopening by four weeks. The last stage of returning to normal is scheduled for June 21 but the fast spread of the Delta variant has pushed policymakers to change their minds.

UK monthly Gross Domestic Product statistics for April are set to show a robust growth rate of over 2% and Bank of England Governor Andrew Bailey speaks later in the day.

WTI Crude Oil is trading above $70 despite reports that Saudi Arabia increased its production. Gold is hovering around $1,900, benefiting from lower US yields.

Cryptocurrencies have been consolidating their gains, with Bitcoin hovering around $37,000 and Ethereum just below $2,500. The relatively calm in digital assets may make way for a turbulent weekend.

The University of Michigan’s preliminary Consumer Sentiment Index figures for June are expected to show a recovery from May’s drop to 82.9. The data is seen as a leading indicator of retail sales.

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