US Markets Consolidate Ahead of CPI Numbers – Dow Up 0.5%
US markets experienced another mixed day as investors assessed early inflation data for the week and anticipated tonight’s CPI data release. The Dow pushed higher, gaining 0.52% on the day, while the S&P rose 0.11%, and the Nasdaq declined 0.23%. The dollar ultimately dropped after the DXY surpassed the 110 level before retreating to close at 109.18. Meanwhile, US Treasury yields showed limited movement compared to recent sessions, with the 2-year yield easing by 1.2 basis points to 4.367% and the 10-year yield increasing by 1.5 basis points to 4.793%.
Oil prices reversed some recent gains following a US report suggesting demand will remain steady over the next year. Brent crude dropped 0.8% to $80.35, while WTI fell 1.67% to $77.50 per barrel. Gold edged higher within its recent range, rising 0.65% on the day to close the NY session at $2,679.51.
Cable in Focus for FX Traders Today
Cable is in focus for many FX traders today, with critical CPI data expected on both sides of the currency equation. Sterling has struggled this year, losing nearly 4% from its peak to trough. Although it has shown some recovery in recent sessions, it remains technically vulnerable.
There’s potential for a double hit that could drive it through recent lows near 1.2100 and into new downside ranges. If UK CPI numbers are weaker and US data proves resilient, expectations for central rate movements will shift sharply, potentially weakening the pound further. It traded near 2023 lows just above the key psychological level of 1.2000, and unfavorable data today could push it below that threshold. Alternatively, more favorable outcomes may see it return to recent ranges. However, given the prevailing trend, particularly the strength of the USD, most traders continue to favor further downside for sterling.
Inflation Data in Focus for Traders Today
The macroeconomic calendar intensifies today, with significant inflation data due from two major regions, likely causing market volatility. The Asian session offered little on the calendar to move markets, but that changes with the European session.
UK CPI figures are expected shortly after the London open, with forecasts for a 2.6% increase in the headline number and a 3.4% rise in Core CPI. Significant deviations from these expectations could lead to sharp movements in the pound.
The major event of the week will be the US CPI data release during the New York session. Expectations for Fed rate cuts have diminished since the year’s start, and if the data confirms inflation remains persistent, US markets could see major moves. Forecasts suggest a 0.4% month-on-month increase in the main CPI, a 0.3% rise in Core CPI, and a 2.9% year-on-year increase.
Additional releases, including the Empire State Manufacturing Index, US Crude Oil inventory data, and comments from several FOMC members, are also on the schedule. However, CPI data will likely dominate market sentiment.
