US Markets Hit by Inflation Data – Dow Down 0.5%
US inflation data came in stronger than expected last night, adding to concerns that the FOMC will not be cutting interest rates anytime soon. The Dow tumbled 0.5%, the S&P lost 0.27%, while the Nasdaq managed a slight 0.03% gain. US Treasury yields surged higher once again, with the 2-year yield adding 7.2 basis points to reach 4.355% and the benchmark 10-year gaining 8.6 basis points to move up to 4.621%. The dollar initially spiked on the data but later gave up its gains, with the DXY finishing the day just 0.03% lower at 107.98.
Oil prices fell after reports that the US and Russia are exploring a deal to end the war in Ukraine, with Brent down 2.61% to $74.99 and WTI dropping 2.66% to $71.39 per barrel. Gold remained relatively flat, rising just 0.05% to $2,903.08 after an earlier decline following the US data release.
Gold in Focus for Traders – Are We Near a Top?
Gold prices have surged in recent weeks amid market uncertainty, primarily due to the new US government and potential tariff plans. However, some traders now believe that the rally may be overextended, as the precious metal has reached record highs on eight separate occasions this year.
US Treasury yields climbed higher again last night after inflation data suggested that Federal Reserve rate cuts may be delayed, or potentially not happen at all. The increased returns on dollar holdings could lead to a reduction in large gold positions. Additionally, markets appear to be reacting less dramatically to geopolitical developments, as traders adjust to the new US administration. This shift could trigger an unwinding of safe-haven flows that have contributed to gold’s recent surge.
While it is difficult to go against the prevailing trend, it is notable that many market participants are now looking for a potential top in the current environment.
Full Calendar Day Ahead for Traders
Financial markets are set for a busy day as traders continue to digest last night’s US inflation data while preparing for further economic updates throughout today’s sessions.
In the Asian session, New Zealand will be in focus as key inflation data is set for release midway through the day. Early in the European session, attention will turn to the UK, where GDP data is due, before shifting across the Channel to Switzerland for the release of key CPI figures shortly after.
Later, the spotlight will move back to the US, where more tier-one economic data is scheduled for release. The latest inflation figures will be published in the form of PPI data, while the weekly Unemployment Claims report will also be released at the same time.
