Spreadex Market Update
Stocks Sink As USD Rallies on Monthly Inflation Rise
Tech stocks suffered heavy losses yesterday in response to stronger-than-expected US CPI
data which squashed any near-term likelihood of a shift in Fed monetary tightening. August
headline CPI was seen rising 0.1% month/month, above the -0.1% reading expected. Core-
CPI was seen rising at a faster 0.6% pace, again above the 0.3% reading expected. Annually,
the data came in at 8.3%, down again from July’s 8.5% reading, though the monthly gain is
attracting most attention here.
With the US Dollar soaring back to highs, stock prices plunged. Among the big moves we
saw yesterday, Meta, Amazon and Apple were three of the standout losses, falling over
10%, 7% and 6% respectively. The NASDAQ was seen losing over 6% in total yesterday,
trading back down towards the September lows.
Key Factors for Today
- USD soars again as US CPI rises once more in August
- Risk markets tumble seeing widespread equities losses
- JPY leads in FX, driven by safe-haven gains and BOJ intervention speculation
- Risk currencies plunge
- UK CPI up next ahead of BOE tomorrow
- Metals and oil fall on stronger USD
Coming Up
- EUR Eurozone Industrial production
- USD US PPI
- NZD New Zealand GDP Q/Q
Equities Rally Reverses As USD Rebounds
It was a tough day overall for equities markets yesterday. The narrative ahead of the US CPI
release had been very much skewed towards a softer reading and a further drop in USD,
allowing for equities to continue higher. However, traders were caught very much offside by
the release, as evidenced by the broad-based losses we saw. The S&P tumbled over 6%, the
FTSE shed almost 3%, the ASX lost more than 3% along with the Hang Seng.
USD Strength Sends Risk-FX Flailing
In FX, the sharp rebound higher in the Dollar has caused a reversal in recent trading themes, sending risk currencies tumbling lower, along with EUR and GBP which had been making solid gains against USD prior to the release. AUD and NZD have been the weakest performers over late Asian and early European trading on Wednesday, both falling by around 3%. The kiwi is now trading at fresh 2022 lows following the report.
JPY Rallies on Safe-Haven Demand & BOJ Chatter
With risk markets tumbling and US growth fears back in focus amidst still-rising inflation, JPY has seen a fresh surge in safe-haven demand, making it the strongest performer today. JPY is also rallying on news of a reported price check from the BOJ, considered a precursor to currency intervention, with speculation growing that the BOJ will look to stem JPY losses.
UK CPI Softens in August
UK CPI today was seen coming in just below expectations at 9.9% vs 10.1% expected. With
inflation still at elevated levels, the data is unlikely to stop the BOE from announcing further
tightening measures tomorrow though does mean that the chances of a peak in inflation
might be building.
Metals & Oil Plunge on USD Rally
It was a heavy session in the metals and commodities space yesterday with gold and silver both plunging as USD rebounded. Crude prices were hit by the US CPI report also. A rising USD has pushed crude futures prices down again today as once more, recession fears return to darken the demand outlook for oil. Oil traders now await the latest EIA report, due to show an almost 2 million barrel surplus last week.
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