A rise in US inflation has prompted stocks to fall sharply, while the greenback has returned to the highs seen at the beginning of the year, says Chris Beauchamp, chief market analyst at online trading platform IG.
US inflation sends markets into fresh risk-off decline
“US inflation looks to be a problem that will not be going away anytime soon according to the latest data released this afternoon. With the core PCE price index widely heralded as the Fed’s favoured inflation gauge, today’s rise of 0.6% for the month of January has sparked a surge in pricing for a 50-basis point hike at next month’s meeting. Perhaps more worrying than a slightly higher terminal rate is the sticky nature of inflation, with yesterday’s pricing for a first rate cut in December 2023 now delayed into 2024. Not all markets are losers under the weight of a higher for longer monetary policy stance, with FX traders enjoying a fresh resurgence for the dollar after months of declines.”
Dollar surge continues
“It is still a month until the next Fed decision, but the way seems clear for the greenback to keep rising. This recent slew of strong data could be turning into a trend, reinforcing the hawkish tendencies of central banks across the globe, but especially in the case of the Fed. Dollar bulls have endured a tough few months, but they are rubbing their hands in anticipation of more gains.”
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
Recommended Content
Editors’ Picks
EUR/USD retreats toward 1.0850 on modest USD recovery
EUR/USD stays under modest bearish pressure and trades in negative territory at around 1.0850 after closing modestly lower on Thursday. In the absence of macroeconomic data releases, investors will continue to pay close attention to comments from Federal Reserve officials.
GBP/USD holds above 1.2650 following earlier decline
GBP/USD edges higher after falling to a daily low below 1.2650 in the European session on Friday. The US Dollar holds its ground following the selloff seen after April inflation data and makes it difficult for the pair to extend its rebound. Fed policymakers are scheduled to speak later in the day.
Gold climbs to multi-week highs above $2,400
Gold gathered bullish momentum and touched its highest level in nearly a month above $2,400. Although the benchmark 10-year US yield holds steady at around 4.4%, the cautious market stance supports XAU/USD heading into the weekend.
Chainlink social dominance hits six-month peak as LINK extends gains
-637336005550289133_XtraSmall.jpg)
Chainlink (LINK) social dominance increased sharply on Friday, exceeding levels seen in the past six months, along with the token’s price rally that started on Wednesday.
Week ahead: Flash PMIs, UK and Japan CPIs in focus – RBNZ to hold rates
After cool US CPI, attention shifts to UK and Japanese inflation. Flash PMIs will be watched too amid signs of a rebound in Europe. Fed to stay in the spotlight as plethora of speakers, minutes on tap.