A stronger US CPI print initially pushed Wall Street and gold higher, while prompting some post-datapoint USD weakness. 

  • US prices rise at fastest pace in thirteen years
  • Wall Street gains as US stocks wake from pre-release slumber
  • ECB sticks to the plan as it upgrades forecasts

It will be interesting to see who had ‘stocks up, gold up, dollar down after strong inflation report’ on their bingo cards today, but those were the immediate moves in global markets, an interesting reflection on how investors perceive the outlook for coming months for both prices and Fed policy. US markets had been hesitant all week, but have found a new lease of life now that the pesky CPI figure is out of the way, with the Nasdaq 100 enjoying a 1% gain, while the Dow and S&P 500 also make headway (and pushing the latter to a new record high). Small caps have been left out of the party, while the crucial ten-year yield is little-changed. It is perhaps testament to how effective the Fed’s adjustment in communication has been recently, since today’s reading would likely have caused a very different reaction if it had come before the gentle shift in tone that has reassured investors about the responsiveness of Fed policy. US initial claims data was mostly overlooked in the CPI excitement, but it is still heading in the right direction, even if it was slightly higher than expected. While the early gains in stocks were trimmed quite rapidly, it is still surprising that markets have held up so well in the face of surging prices. 

Meanwhile the ECB meeting was relatively dull by comparison, although the bank did take a fairly sunny view of the outlook, upgrading growth and inflation forecasts, while sticking to its bond-buying plans. Even the expected changes to the statement regarding the level of purchases failed to materialise, but early post-decision gains in eurozone stocks were knocked back as the dollar weakened in the wake of the US CPI print, pushing up EURUSD. Having laid down a marker last month by pushing yields higher, the market appears to have given the doves the ammunition they needed to ensure the ECB will leave things as they are for the time being. 

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