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Forex Today: Markets Expect US CPI to Fall to 3.4%

Markets are keenly awaiting US CPI data which will be released later today, expecting a decline in the annualized rate from 3.5% to 3.4%.

  1. The most important macro data release in the market will be given today – US CPI (inflation), which is expected to show a decline in its annualized rate from 3.5% to 3.4%, based on a month-on-month increase of 0.4%. If the data comes in lower than expected, as major US and global stock indices look bullish already, we could see a strong rally in stock markets leading to new record highs. If higher than expected, we can expect a selloff in stocks and a sharp rally higher in the US Dollar.
  2. Major US stock market indices are already advancing bullishly towards their all-time highs, after the MSCI All Country World Index closed at an all-time high Tuesday. The bullishness is widely believed to be because S&P 500 Index companies are reporting higher than expected corporate earnings, beating market expectations. Day traders might consider trying to trade major US equity indices on the long side. If US inflation is low, we could easily see record highs reached.
  3. Fed Chair Jerome Powell said yesterday that the Fed needs to see more evidence of cooling inflation before cutting rates, calling for patience. US PPI data released yesterday came in considerably higher than expected, at a 0.5% month-on-month increase when only 0.3% was expected, suggesting inflationary pressure on the sales side remains persistent.
  4. In the Forex market, the major story is the continuing weakness of the Japanese Yen, so Forex traders may want to look for short Yen trades over the short term. The US CPI data release today will probably produce volatility in the US Dollar and make a trade there more attractive, especially if the data is surprising in any way.
  5. Gold and Silver rose yesterday, with Silver looking the more bullish. Both are not far from significant high prices.
  6. Copper futures are continuing to rise to reach new 2-year high prices, so will be attractive to trend traders on the long side.
  7. There will be releases later today of the following key data points:
  • US Retail Sales
  • US Empire State Manufacturing Index
  • Australian Unemployment Rate
  1. Yesterday’s UK Claimant Count Change (unemployment claims) data came in slightly better than expected.

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