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General Market Analysis 13 October 2023

US Inflation Data Higher – Dollar Surges 0.85%

US CPI data printed higher than expected and markets adjusted again to the ‘higher for longer’ mantra that had slipped over the last week of trading. The dollar surged higher to finish up 0.85% against the usual basket of majors with most of the pairs filling in moves that they had spent the last few days making. US stock indices predictably dropped with the Dow down 0.51%, the S&P down 0.62% and the Nasdaq 0.63% lower. Oil prices also took a dip on the back of the stronger dollar as well as a large build-up in US crude stockpiles. Gold fell 0.3% but still remains well-bid on the week in line with its safe-haven status.

Investors Re-adjust after CPI Data

Currency traders have spent most of this week watching the dollar decrease against the majors as a procession of Fed members has produced a more dovish view of the market. However, all this changed quite rapidly last night as the key CPI numbers came out slightly higher than expected and the dollar rallied strongly. The month-on-month number was 0.1% higher than expected as was the year-on-year number coming in at 3.7% once again showing signs of a resilient US economy in the face of higher rates. Markets are now pricing in the possibility of a rate hike by December at 35.6% and traders are preparing for more strength in the dollar in the sessions ahead as the data fails to back up FOMC comments in the short term.

More Data and Central Bankers Ahead Today

Traders in APAC will not have too long to adjust to the latest US CPI data before they have to contend with the same numbers out of the worlds second-biggest economy. Chinese CPI numbers are due out early in the day today and investors will be hoping for some encouraging news to assist beleaguered markets. The European day will once again see investors focus on the UK with Bank of England Governor Andrew Bailey set to speak in Morocco, we are also due to hear from ECB President LaGarde and Fed member Harker later in the day. The US session also sees key sentiment data out in the form of the Prelim University of Michigan Consumer Sentiment before traders can even think of putting their feet up for the weekend.