Dollar and equities trade higher in anticipation of US CPI release
XM Group | Apr 10, 2024 04:56AM ET
- US Dollar and stocks are in the green today ahead of the key US CPI report
- All eyes will be on equites if CPI surprises on the upside
- RBNZ remains hawkish; BoC could show a dovish tilt
Dollar and stocks in the green ahead of US CPI
The US dollar is higher today as the market is preparing for this week’s key event. While Thursday’s ECB meeting is crucial, today’s US inflation report could determine the wider market performance until the May 1 Fed meeting.
The market is fixated with a Fed summer rate cut as it continues to price in the first 25bps rate move in July. While this move could happen, the recent data clearly do not point to an economy in need of a boost. Therefore, today’s inflation figure is extremely important.
Forecasts point to a small acceleration at the headline figure to 3.4% year-on-year but expect an easing of the core indicator to 3.7%. These levels are incompatible with a central bank supposed to be on the brink of cutting rates. Interestingly, after the release, three Fed members – Bowman, Barkin and Goolsbee - will be on the wires and possibly comment on the CPI numbers.
An upside surprise could push the dollar higher against the euro, but its performance, once the dust settles down, would depend on the equity market. With the earnings season starting on Friday, a possible realization that the Fed might not cut rates at all during 2024 could create angst in the market.
Bank of Canada meets today; could see a dovish tilt
Not long after the US CPI release, the BoC concludes its meeting. With inflation dropping aggressively and the labour market easing considerably as the unemployment rate reached a 26-month high in March, it looks like the BoC could be the next one to cut interest rates.
However, the recent rally in oil prices is complicating the outlook. Higher oil prices are a boon for the Canadian economy as the WTI oil future is around 10% higher than it was at the March BoC meeting. The loonie remains under pressure since the start of 2024 and a dovish BoC meeting could confirm this trend.
RBNZ stands pat, remains hawkish
The kiwi is higher today against both the dollar and aussie after the RBNZ did not confirm the dovish expectations. Despite the economy moving back in recession and inflation possibly remaining on a downward trend, Governor Orr and co repeated the February 2024 comment that “maintaining the OCR at a restrictive level for a sustained period will return consumer price inflation to within the 1 to 3 percent target range this calendar year”.
Gold, bitcoin continue to diverge
Gold continues to record a new all-high in every other session, driven by several catalysts. Interestingly, the almost perfect correlation with bitcoin broke down yesterday with the king of crypto suffering as market participants are possibly thinking ahead to the upcoming halving.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.