The price of the US Dollar against the Colombian Peso has fallen for the eighth consecutive day. The USD/COP has fallen today to the lowest since June 13 at 4,022.94, after having touched a daily high at 4,084.29.
USD/COP is trading at 4,057.85 at the time of writing, losing 0.21% on the day.
Colombian inflation rose to 7.18% annually in June, exceeding expectations
- Colombia’s Consumer Price Index (CPI) rose two-tenths of a point in the year-on-year reading for June, rising to 7.18% from 7.16% in May, its highest level in three months, also exceeding the 7.13% expected by the market.
- On a monthly basis, Colombian inflation grew by 0.32% compared to 0.43% previously and 0.27% expected.
- Traders are awaiting Fed Chairman Jerome Powell’s appearance before the US Congress today, as he may provide clues about the US inflation data to be released on Thursday.
Economic indicator
Consumer Price Index (YoY)
The Consumer Price Index (CPI) is published by the National Administrative Department of Statistics (DANE) of Colombia, measures the variation in the price of goods and services representative of household consumption. It is a way of measuring changes in consumption and inflation trends. Readings above expectations could be interpreted (taking into account the potential impact on monetary policy) as positive for the Colombian peso (COP), while readings below expectations as negative for the Colombian currency.
US Dollar FAQs
The United States Dollar (USD) is the official currency of the United States of America, and the de facto currency of a significant number of other countries where it is in circulation alongside local banknotes. As of 2022, it is the most traded currency in the world, accounting for over 88% of all global foreign exchange transactions, equivalent to an average of $6.6 trillion in transactions per day. Following World War II, the USD took over from the British Pound as the world’s reserve currency.
The single most important factor influencing the value of the US dollar is monetary policy, which is determined by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and to promote full employment. Its main tool for achieving these two goals is to adjust interest rates. When prices rise too quickly and inflation exceeds the Fed’s 2% target, the Fed raises rates, which helps the dollar. When inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the dollar.
In extreme situations, the Federal Reserve can also print more dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a jammed financial system. It is an unconventional policy measure used when credit has dried up because banks are not lending to each other (for fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis of 2008. It involves the Fed printing more dollars and using them to buy US government bonds, primarily from financial institutions. QE typically leads to a weakening of the US dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal of maturing securities in new purchases. It is generally positive for the US dollar.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
