As expected, annualized US inflation data fell to 2.5%, but the core consumer price index was slightly higher than expected, leading to more hawkish expectations about the Fed's monetary policy stance.
➡️ Yesterday, the US Consumer Price Index (CPI) (inflation) data was released. While the annual benchmark rate fell from 2.9% to 2.5% exactly as expected, The core consumer price index, which is most closely watched by the Fed, rose 0.3% on a monthly basis, when a gain of only 0.2% was expected.. This has dampened expectations of Fed rate cuts for the remainder of 2024: previously, a total cut of 1% was expected by 2025, but now the consensus is for a total cut of only 0.75%. The US dollar has seen minor gains and US Treasury yields have risen, due to the slightly positive data. Next week we will see whether the Fed cuts by 0.25% or 0.50%. Another clue will come today in the form of US Consumer Price Index (PPI) data, which is a key indicator of inflationary pressure: a monthly gain of 0.1% is expected.
➡️ The day just gone by saw strong gains by the stock markets, especially in the technology sector and especially in Asia. In particular, the Japanese Nikkei 225 Index rose above 3% today, which represents a significant bullish move.
➡️ The European Central Bank will hold a monetary policy meeting today, during which it is expected to cut its main refinancing rate by 0.60%, from 4.25% to 3.65%.
➡️ The Japanese yen continued to show volatility, but the USD/JPY currency pair rose after the release of US CPI data, after hitting a long-term low below ¥141. A few hours ago, Tamura of the Bank of Japan said that Japan's natural interest rate is around 1% (currently at 0.25%) and that it needs to increase in a "timely and gradual manner." However, this comment did not boost the relative value of the yen.
➡️ In the Forex market, the New Zealand dollar was the strongest major currency since the Tokyo open today, while the US dollar was the weakest. There is a valid long-term bearish trend in the USD/JPY currency pair, but the price is currently moving against this trend.
➡️ They retested its all-time high but retreated, as it has done several times in recent weeks. This pattern suggests a strong bullish breakout is imminent, so a daily close at a new all-time high could be an excellent long trade entry signal here.
➡️ Vice President Kamala Harris has now narrowly overtaken former President Trump in the betting markets as the likely narrow winner of November's US presidential election. However, the polls remain extremely tight.
➡️ U.S. unemployment claims data will be released later today.
Credit by DailyForex.com
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