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Analysis

The lowest inflation reading in 2 years

BY Janne Muta

|June 14, 2023

Major US equity indices moved to new YTD highs as the latest Consumer Price Index (CPI) data showed the headline inflation cooling to 4%. This was the lowest reading in over two years. The deceleration in inflation means the Fed is unlikely to hike in today’s meeting.

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The S&P 500 touched new heights for 2023, gaining 0.7% for the day while the technology-heavy Nasdaq moved 0.8% higher. The blue-chip index, the Dow Jones Industrial Average, had only a modest increase of 0.4%. Gold traded lower by 0.72% as yields moved higher while USOIL rallied by 2.9%. EUR gained 0.33% against the dollar while JPY lost 0.44% against the greenback.

Amid the general market upswing, cyclical sectors and small-cap stocks were particularly strong. The basic materials sector rallied 2.32%, while T-Bonds traded lower, indicating a shift in investor sentiment towards riskier assets. The rally was fairly widespread across sectors, with industrials and materials stocks taking the lead. The robust performance of the Russell 2000 index continued showing investors are starting to believe we are in a bull market.

Although some market analysts anticipate a pause in the Fed's rate-hiking cycle following today’s FOMC meeting, traders are pricing in a 63% chance of a rate increase in July. As such, market watchers will be keeping a close eye on the Fed's language in today’s press conference.

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S&P 500

S&P 500 is bullish above 4333. Below the level, the market might trade down to 4320.

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GBPUSD

GBPUSD is bullish above 1.2486. Below the level, the market could move to 1.2450.

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AUDUSD

AUDUSD bullish 0.6738. Below the level, the market probably trades down to 0.6650. Note that yesterday’s shooting star candle in the daily timeframe chart is a risk factor for the AUD bulls. The market has rallied quite a bit over the last two weeks and is now trading near to a major resistance level. The market could still rally but it really depends on Fed’s actions and communication on the future monetary policy.

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CADJPY

CADJPY is bullish above 104.24. Above 104.24, look for a move to 106.50 and then possibly to 108 on extension. Below the level, the market could move to 103.80. The nearest key support level is at 104.77.

The Next Main Risk Events

  • USD PPI
  • USD FOMC Economic Projections
  • USD FOMC Statement
  • USD Federal Funds Rate
  • USD FOMC Press Conference

For more information and details see the TIOmarkets economic calendar.

Trade Safe!

Janne Muta
Chief Market Analyst
TIOmarkets

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Janne Muta

Janne Muta holds an M.Sc in finance and has over 20 years experience in analysing and trading the financial markets.

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