Spreadex Market Update
US CPI Highest in 40 Years – Retail Sales in Focus Today
The latest set of US inflation figures yesterday showed that consumer prices are still at elevated levels in the US. The CPI was seen at 8.2% last month, above the 8.1% the market was looking for and more than four times the Fed’s own 2% target. The reaction in the Dollar reflects that of a market concerned with picking a top. However, this feels premature, given how hawkish Fed commentary continues to be. Today, traders will look to the latest set of US retail figures, which will give a strong insight into Q3 GDP. Given that the bar is set relatively low (core reading expected negative), any upside surprise today should help lift USD once again.
Key Factors for Today
- USD falls back despite stronger-than-expected CPI – Retail sales in focus today
- Equities recover as USD falls
- Risk FX rebounds on Friday following strong gains yesterday
- Oil and metals higher amidst weaker USD
Coming Up
- USD US retail sales
- USD UoM Consumer sentiment
- USD Fed’s Cook speaks
Equities Rebound – US Retail Sales on Watch
Equities prices were seen rebounding firmly yesterday, despite US inflation data showing consumer prices are at their highest level in 40 years. Given the data, the move suggests that markets had been pricing in such a result, explaining the week of straight declines ahead of the data. Technical or not, the price action at recent lows in US stocks certainly looks inviting for bulls. Today's key challenge is the latest set of US retail figures, which might see the USD swing back into demand if positive. Alternatively, should data undershoot forecasts, equities look poised to enjoy further gains as the USD comes off.
Risk FX Rallies On Weaker USD
In FX, the decline in USD has seen a reversal in recent trading themes, with risk currencies rebounding strongly across the European open on Friday. NZD & AUD are leading today. However, the latest US retail sales figures due later today have the potential to either amplify or reverse these gains. Traders will also be keeping track of the latest Fed commentary with FOMC member Cook due to speak later also. Given the heavy sell-off we’ve seen recently, risk currencies look poised to recover well if we see any further USD downside on the back of today’s data.
Metals & Oil Rebound Amidst Dollar Decline
In the metals and commodities space, both gold and silver were seen rebounding off initial lows yesterday, bolstered by the decline in USD. However, given the sharp moves we’ve seen across the risk complex, metals have been unable to capitalise fully on a weaker Dollar, with traders looking for better yield elsewhere. Oil prices turned higher, too yesterday. The rally comes despite the latest EIA report showing a massive 9.9 million barrel surplus last week. The increase is largely linked to the latest US strategic reserve release.
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