FXTM information and reviews
FXTM
93%
OctaFX information and reviews
OctaFX
92%
XM information and reviews
XM
91%
FXCC information and reviews
FXCC
90%
Libertex information and reviews
Libertex
89%
FxPro information and reviews
FxPro
88%

Equity bulls jittery, dollar sinks as investors digest inflation data


14 January 2022 Written by Lukman Otunuga  Senior Research Analyst at FXTM Lukman Otunuga

Most Asian shares ventured into negative territory this morning while European stocks markets have opened up marginally lower open after the December U.S. inflation report reinforced Fed rate hike expectations. The U.S. consumer price index (CPI) jumped 7% year-on-year, matching the median forecast from economists surveyed by Bloomberg and up from 6.8% in November. Core inflation, which strips out volatile items like food and energy, rose 5.5%, well above the 4.9% reported in the previous month.

Markets initially offered a calm reaction to the hot report with Wall Street closing modestly higher on Wednesday. The most notable price action was seen in FX markets, with king dollar breaking down as Treasury yields pulled back, while gold bugs were injected with renewed confidence. The December CPI report has presented further evidence of persistent price pressures, especially with inflation registering its biggest annual gain since 1982.

As expectations intensify over the Fed raising interest rates as soon as March, this may weigh more heavily on global stocks. while supporting the dollar and Treasury yields in the medium term. Given how markets remain sensitive to comments from Fed officials, today could see more volatility with numerous Fed speakers on the roster.

Dollar Index (DXY) slams into 95.00

The dollar tumbled to a two-month low against a basket of currencies yesterday after the inflation figures for December matched expectations. Investors may have seen this data as bearish for the world’s reserve currency as they were possibly expecting the figures to be even hotter. Nevertheless, the headline surged 7% last month, its biggest year-on-year increase since June 1982 and seven of the last nine releases have now come in above consensus. Traders are currently pricing in an 84% probability of at least one rate hike by mid-March 2022.

Looking at the technical picture, the Dollar Index remains under pressure on the daily charts. A breakdown below 95.00 could open the doors towards 94.56 and 94.00, respectively.

Commodity spotlight – Gold

After notching its sharpest weekly loss since November, gold bulls have returned with a vengeance this week. Gold continues to draw strength from a weaker dollar and slight pullback in Treasury yields with prices trading around $1826 as of writing. Inflation risks could also be supporting upside gains for gold which has often been considered a hedge against rising prices. With inflation in the United States jumping in December, this could encourage some investors to hold onto their gold investments.

However, the precious metal is certainly not out of the woods yet. The zero-yielding asset tends to perform poorly in a high interest rate environment. So, with the Fed expected to hike as soon as March, the road ahead for gold bugs could be filled with bumps and obstacles. On top of this, the dollar may regain its mojo on rate hike bets with Treasury yields pushing higher. Should this become a reality, gold could be in store for fresh pain down the road.

Technically, the precious metal has the potential to push higher towards $1845 if a daily close above $1831 is achieved. Alternatively, a decline back below $1810 could prices move lower towards $1800, $1786 and $1770.

#source

Share:


Related

Record-breaking but near-peak inflation in Britain
Record-breaking but near-peak inflation in Britain

UK consumer prices rose by 2.5% in April, the second-biggest monthly gain in the indicator’s history since 1988. Annual inflation jumped from 7% to 9%, unseen in the indicator’s history...

19 May 2022

GBPCHF on a strong footing
GBPCHF on a strong footing

GBPCHF is testing some key levels here at the 1.25 level and looking very interesting. Read below to find out more. The quid has a few factors working in its favour...

18 May 2022

Crypto Markets Slide as TerraUSD and Tether Breaks its Peg with the U.S. Dollar
Crypto Markets Slide as TerraUSD and Tether Breaks its Peg with the U.S. Dollar

Stablecoins have one job. To maintain their value at $1 per coin. That job failed after Tether (USDT), the most prominent "stablecoin" and integral part of the cryptocurrency ecosystem...

18 May 2022

The Impact of a Major Crypto Market Crash on the Indian Stock Market
The Impact of a Major Crypto Market Crash on the Indian Stock Market

Bitcoin and Ethereum are currently trading at their lowest levels. There are two major factors behind this week’s cryptocurrency crash. The first is rising interest rates around the world...

17 May 2022

European Stocks Stable After Extreme Slide Since 2020
European Stocks Stable After Extreme Slide Since 2020

European stocks and U.S. stock futures rose. Markets developed steadily after fears of global growth led to a sharp drop from the previous session. The Stoxx Europe 600 stock index added 1 percent...

13 May 2022

Dollar growth is a key market driver
Dollar growth is a key market driver

The euro steadied against the U.S. dollar on Wednesday on expectations that the European Central Bank will raise its benchmark interest rate in July for the first time...

13 May 2022


Editors' Picks

HFM information and reviews
HFM
87%
IronFX information and reviews
IronFX
86%
FXCM information and reviews
FXCM
85%
LegacyFX information and reviews
LegacyFX
83%
NordFX information and reviews
NordFX
82%
FP Markets information and reviews
FP Markets
81%

© 2006-2022 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.