Markets Drift Ahead of Inflation Data – Dow Down 0.35%
US stock indices edged lower in trading yesterday as investors awaited today’s key inflation data release. The Dow led the decline, falling 0.35%, followed by the S&P, which lost 0.3%, and the Nasdaq, which dropped 0.25%. The dollar strengthened once more, with the DXY rising 0.2% to 106.40, alongside treasury yields, which also moved higher. The 2-year yield gained 1.6 basis points to reach 4.141%, while the 10-year yield rose 2.3 basis points to 4.224%. Oil prices continued to trade within recent ranges, with Brent slipping 0.12% to $72.05 and WTI rising 0.13% to $68.45. Gold experienced a significant gain, climbing 1.28% to $2,692.83 as traders priced in rising geopolitical concerns.
Another Rate Cut for Canada Expected Today
The Bank of Canada is expected to cut interest rates by a further 0.5% later today, bringing the key rate down to 3.25%. The unemployment rate has risen to 6.8% over the past month, its highest level since January 2017, and most market participants believe this justifies the larger cut. This marks the fifth rate reduction since June, and with inflation hovering around the 2% level, traders anticipate more cuts ahead. The Canadian dollar has been under pressure against the US dollar in recent months, with USD/CAD currently trading near annual highs. Should the expected 50-basis-point cut materialise, particularly if coupled with a strong inflation data print from the US, further upward moves in the pair are likely.
Markets Expected to Liven Up Later Today
The macroeconomic calendar is relatively quiet during the first two sessions of the day. However, traders expect volatility to increase significantly once the New York session begins. The Reserve Bank of Australia’s Deputy Governor is scheduled to speak during the Asian session, but otherwise, the schedule is sparse. The same is true for the European session. The key US CPI data is due early in the New York session, with expectations of a 0.3% month-on-month increase in both the headline and core figures. Later in the day, attention will shift to Ottawa for the Bank of Canada’s latest rate decision, where another 50-basis-point cut is anticipated.
