Eyes on the Fed after US CPI data exceeds expectations

The highly anticipated US CPI report for April came in well above expectations showing an increase of 0,9% for the Core reading compared to the expected 0,3% after headline inflation surprised to the upside in March at 2.6% y/y. The pick-up in inflation in March was mainly a result of higher fuel prices but investors generally ignored the data thanks to reassuring comments from the FOMC. Market reaction is a key issue this time since if the Fed was actually worried about inflation, higher readings could have obvious ramifications. However, as long as the Fed maintains its stance on the fact that such it’s transitory, inflation would probably need to be much higher above expectations (perhaps above 4%) to spook the markets and actually force the US central bank to potentially adjust its policies, a thing they have said would not take place for the time being. Any deviation from the narrative the FED has set up thus far could have bigger ramifications on stock markets, while investors continue to closely monitor the FED’s approach.

Oil prices remain under pressure as supply concerns grow

While the pipeline situation in the east coast of the US remains unresolved, oil prices have been under more pressure as supply concerns continue to rise as it is said that 20% of gas stations in Atlanta are already out of fuel. Despite this, authorities have asked citizens to avoid panic buying gasoline as they attempt to restore supply following the hacker attack last Friday which targeted one of the major pipelines in the country. The price of Brent has managed to extend the upward move and reach a high of $69,50 before pulling back slightly while US WTI crude prices rose over 2% and briefly reached the highest level in a week ($66,30) before retreating. The Canadian dollar, which is one of the most closely correlated currencies to Oil prices, is one of the best performers today as it trades higher against most other majors/emerging markets and safe-haven currencies with USDCAD reaching the lowest level in over 3 years.