The lowest inflation reading in 2 years
BY Janne Muta, M.Sc in Finance|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.
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.
S&P 500 is bullish above 4333. Below the level, the market might trade down to 4320.
GBPUSD is bullish above 1.2486. Below the level, the market could move to 1.2450.
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.
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.
Chief Market Analyst
DISCLAIMER: TIOmarkets offers exclusively consultancy-free service. The views expressed in this blog are our opinions only and made available purely for educational and marketing purposes and do NOT constitute advice or investment recommendation (and should not be considered as such) and do not in any way constitute an invitation to acquire any financial instrument or product. TIOmarkets and its affiliates and consultants are not liable for any damages that may be caused by individual comments or statements by TIOmarkets analysis and assumes no liability with respect to the completeness and correctness of the content presented. The investor is solely responsible for the risk of his/her investment decisions. The analyses and comments presented do not include any consideration of your personal investment objectives, financial circumstances, or needs. The content has not been prepared in accordance with any legal requirements for financial analysis and must, therefore, be viewed by the reader as marketing information. TIOmarkets prohibits duplication or publication without explicit approval.
Janne Muta holds an M.Sc in finance and has over 20 years experience in analysing and trading the financial markets.
GBPAUD analysis | Economic divergence intensified selling in GBPAUD
This comprehensive GBPAUD analysis focuses on the GBPAUD currency pair using multi timeframe analysis as well as examines the fundamental landscapes in both the UK and Australia. On the tec...
Dow Jones technical analysis | Hawkish Fed pushed DJ to key support levels
Dow Jones technical analysis report - The Dow Jones Industrial Average (DJ) is at a pivotal moment, according to recent our technical and fundamental analyses. After a 13.5% rally since March...
Silver technical analysis | Silver to rally from key support?
Our comprehensive silver technical analysis identifies a sideways trading pattern on the weekly chart, underpinned by reactionary lows that suggest institutional buying each time the market a...
Trade responsibly: CFDs are complex instruments and come with a high risk of losing all your invested capital due to leverage.