US Inflation Saw Stocks Fall From Highs – Can They Rebound Today?

We saw plenty of whipsaw action across markets yesterday as traders reacted to the latest set of US CPI figures. Stocks jumped initially with yields peeling off as the headline figure was seen falling to 5% from 6% prior, a bigger fall than forecast. However, these initial moves were reversed as the core figure was seen rising to 5.6% from 5.5% prior. Stickiness in core inflation appears to make enough of a case for the Fed to hike again next month with the S&P seen dropping more than 1% from yesterday’s highs as markets digested the data.

Silver Breaks Out – Highest Level Since April 2022

Gold prices are pushing higher today on the back of yesterday’s US data with the precious metal around $2021 currently. Silver, meanwhile, was seen breaking out yesterday to its highest level since April 2022. Following the CPI release, the March FOMC minutes did little to alter the picture with members agreeing that the bank’s core goal (despite recent banking turmoil) is to drive inflation lower.  USD has come under pressure across the European open on Thursday, however, allowing gold and silver room to rally for now.

In FX, the Swiss Franc has been the best performer so far on Thursday. Despite a stronger tone to risk sentiment, following yesterday data-driven weakening, CHF is seeing a wave of demand. USD has been the weakest performer so far with traders now turning to today’s US PPI data and unemployment claims as the next key focus.

The FTSE is currently stalled at the 7835 level while GBP has been seen broadly stronger this morning despite the latest UK economic data. UK GDP was seen at 0% last month, down from 0.4% the prior month and below the 0.2% figure the market was looking for. The IMF warned this week that the UK is forecast to suffer a 0.3% contraction in growth overall this year, with Germany the only other economy in the G7 projected to suffer a recession.

The Bank of Canada held rates unchanged again yesterday. However, it did note that inflation was proving tougher than expected to get down to its 2% target. Inflation expectations were also seen lowering at a slower pace than the bank would like meaning that further rate action down the line could not be ruled out if inflation remains elevated.