Happy Valentine’s Day. US inflation data tugged market sentiment one way then the other over the past couple of sessions. Wednesday’s CPI print caused some degree of panic after both the headline and core rates came in higher than expected, pushing the Dow and S&P 500 to minor losses. The data release made for a volatile day in currencies but ultimately the Dollar closed flat. Before markets had a chance to fully process the implications of higher inflation, the following day’s PPI numbers considerably softened the blow. Although still higher than expected, the figures suggest that the rate of appreciation has slowed down from December.
A small sign, but markets were all too happy to seize it. The first whiff of hope that the Fed may have grounds to cut interest rates in the not-too-distant future. Wishful thinking or not, the Dollar plummeted to the downside, dragging the DXY down 0.84% on the day. Gold took the other side of the equation, gaining an equal percentage to reach $2,928 an ounce. US stocks also took the news well, with all three major indices making decent gains, the S&P 500 in particular closing just shy of a record high.
There is still a long way to go before the next Fed meeting on the 19th of March, and a lot of fresh economic data along the way to orient their decision. Crypto markets are eagerly waiting a new era of lower rates, but for the time being are somewhat penned in. Bitcoin has still not convincingly broken and held above $100k and a lot of the major cryptos have displayed even weaker price profiles since the start of the year.
The bulk of the week’s drama is likely behind us at this point, but US retail sales could step in later today to provide one last bump in the road before markets settle down for the weekend. Buy flowers.
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