The long-awaited inflation data from the United States is behind us, and it was higher than expected.
Yesterday, as many market participants anticipated, inflation increased more than expected: from the previous month’s 0.4% to this month’s 0.6%, compared with expectations of 0.5% for the headline CPI m/m. Even the core data rose from 0.1% to 0.3% (compared with 0.2% expected).
The U.S. dollar took a tumble across the board, with the EUR/USD now struggling to get back above 1.20 after trading at 1.1880 when the inflation figure was released yesterday. Even the USD/JPY declined to trade below 109.
U.S. stocks benefited from the inflation figure, and the S&P 500 reached another all-time high shortly after the release. Major American financial corporations — Goldman Sachs, J.P. Morgan, Wells Fargo — are expected to release their numbers soon.
Commodities prices also rose on the weaker dollar theme, with oil is back above $61 and gold staying stable at around $1,750.
Today is all about central bankers delivering verbal interventions, starting with ECB President Christine Lagarde speaking at an online event hosted by Reuters, her challenge being to explain why the ECB did not deliver on its promise to increase PEPP purchases. The challenge for the Fed’s Jerome Powell and other fed members is to explain inflation at the Economic Club of Washington.
Markets to Watch
The Dow Jones, EUR/USD, and USD/JPY markets are in focus today.
The Dow Jones remains stubbornly well-bid despite the RSI showing some huge divergences in the last few months. However, traders should be cautious before shorting the index because such divergences also form before intensive rallies. As long as the market keeps pushing with new higher highs and higher lows, it remains well-bid.
The triangle mentioned yesterday broke higher after the US inflation figures were released. The EUR/USD pair is now on course to reach 1.20, and the chances are that it will have a hard time trading above that level as sellers will likely step in. Speeches by Lagarde and Powell today could give the EUR/USD pair plenty of reasons to move.
The USD/JPY pair finally eases from the highs as momentum favours a decline rather than more advances. While at dynamic support currently, the focus is to see what the pair will do when reaching main trendline support at 108.17.
Winners and Losers
EUR/USD is the main winner after the inflation data, while the stock market in the United States keeps pushing for new highs.