CPI Report Sparks Volatility and Shifts Sentiment

The latest financial market news has been dominated by the release of the CPI report, which sent shockwaves through the markets. Investors have been closely watching the inflation data, and its impact has been substantial. Let's dive into the key factors driving today's market movements.

Key Factors for Today

• Markets experience a surge in response to the CPI report, leading to a revaluation of rate hike expectations.
• The US dollar takes a hit as the CPI report falls short of expectations, fuelling speculations of rate cuts.
• Strong wage growth in the UK poses challenges for the Bank of England's potential rate cuts.
• The euro shines as the dollar weakens, supported by positive German sentiment.
• China's ongoing property sector struggles contrast with encouraging factory and retail data, affecting oil prices.
• Japan faces economic contraction, raising concerns of a recession.

Market Movers

• Dollar index plunges 1.50% in its most significant decline in over a year.
• GBPUSD soars 1.80% to 1.25 due to a weak dollar.
• EURUSD approaches an August high, touching 1.09 amid a collapsing dollar.
• WTI oil prices remain stable, with support at 77.65 and resistance at 79.70 per barrel.
• USD/JPY experiences a 0.90% decline, reflecting Japan's economic contraction.

Economic Calendar

• DE Wholesale Prices
• GB Inflation Rate
• ECB Non-Monetary Policy Meeting
• EA Industrial Production
• US PPI
• US Retail Sales
• NY Empire State Manufacturing Index
• Fed Barr Speech
• EIA Crude Oil Stock Change
• Fed Barkin Speech
• European Commission Autumn Forecasts

The Big News

Inflation Data Surprises Markets

Headline CPI inflation remained stagnant in October, contrary to expectations of a 0.1% monthly rise. Core inflation also fell below forecasts at 0.2%. Yearly figures dropped by 10 basis points each, with inflation at 3.2% and core inflation at 0.2%. This unexpected data has led investors to believe that the Federal Reserve may cease hiking rates and shift towards a softer landing. Consequently, the US dollar saw its most significant one-day decline in over a year, dropping 1.50%.

UK Wage Growth Defies Expectations

The Office for National Statistics reported that wage growth in the UK fell only slightly from its 2001 records of 7.9%, surpassing expectations of 7.2%. This unexpected strength in wage growth, when adjusted for inflation, poses a challenge for the Bank of England, which may reconsider its plans for rate cuts. Despite a drop in job vacancies, the labour market remains tight, leading GBPUSD to surge by 1.80%.

Euro's Resilience Amid Dollar Weakness

Germany's ZEW sentiment index exceeded expectations, rising to 9.8 in November from -1.1 the previous month. This marked the fourth consecutive month of positive expectations for the German economy. Although Euro Area GDP showed a quarterly contraction, strong employment data surpassed forecasts. The euro's value climbed against the weakening dollar, reaching an August high and approaching the 1.09 mark, with resistance seen at 1.0942.

Mixed Signals from China

China's property sector continues to struggle, despite efforts by the central bank to provide liquidity support. However, China's factory output and retail sales outperformed expectations, lending support to oil prices as China remains a major oil consumer. The International Energy Agency (IEA) joined OPEC in projecting annual oil demand growth, despite expectations of slower economic growth, citing China's oil consumption.