US Markets Solid Ahead of Inflation Data
US stocks had a good day yesterday ahead of key inflation data that will hit the markets in the New York session today. The Nasdaq rallied well as the megacaps performed strongly, finishing the day up 0.75%, with the S&P and Dow following in its wake closing up 0.57% and 0.45% respectively. US treasury yields gained ground again after comments from Fed member John Williams, the 10-year edging 2 basis points higher to 4.03% . The dollar dropped slightly against most majors although was noticeably higher against the Yen as soft data out of Japan continues to weigh on its currency. Oil prices fell 1% after a surprise jump in US crude stockpiles and Gold remained pressured near recent lows.
US CPI Data is Crucial for Markets Today
US treasury yields gained ground again yesterday as New York Fed President John Williams advised that he felt that the Fed needed to see more evidence of cooling inflation before cutting rates. If there wasn’t enough focus on today’s CPI data in the US, those comments probably sharpened it even further. Given the markets expectation for rate cuts in 2024 there is a real risk that if the number comes out higher than expected we could see some hard and fast moves across all products, with stocks taking a hit and the dollar rallying. Bets are still running at 65% that we will see a cut in March from the Fed, but if inflation remains sticky in line with strong jobs data, then there could be a major re-think of the moves that we saw at the end of 2023.
Calm Trading before the Post CPI Storm
Global financial markets have had a relatively quiet week so far as most traders have been focused on today’s key inflation data out of the US. There is little in the way of any other data releases or central bank updates today in the earlier two sessions and so investors are expecting quiet trading conditions ahead of the New York open. Expectations are for a 0.2% increase in the headline monthly data and a 0.3% increase in the Core number, with the year-on-year rising to 3.2%. Anything significantly off these expectations will see markets move and given the focus that there is on this data we are likely to see markets kick back into action even if the numbers come out dead on their forecasts.
