Calm Markets Ahead of Inflation Data
Global markets had a relatively quiet day yesterday as investors await the latest CPI data out of the US and its impact on Fed thinking. US indices all finished close to flat, the Dow closed up 0.16%, the SS&P down just 0.08% and the Nasdaq dropped 0.22%. Treasury yields moved higher, with the benchmark 10-year hitting a one-week high at 4.696% and the currencies remained rangebound, although there was some excitement when the USDJPY pushed to fresh highs before beating a hasty retreat. Oil and Gold both moved higher but remain under pressure from a longer-term perspective.
Inflation Data today is Key
Markets were very subdued during the trading day yesterday as global investors looked ahead to today’s key CPI number in the US. Market expectation is for a 0.3% increase in the monthly core CPI and a 0.1% increase in the overall CPI number with the year-on-year dropping to 3.3% from the previous 3.7% print. The risk still probably lies to the upside in the number and therefore to the downside from risk given recent moves in stocks and treasuries, with anything coming out in line with expectation giving the green light for investors to jump back on the recent trend. However, given the importance of this number, traders are expecting a very busy final session to the day.
A Calm Before the Storm Day for Markets
There is no doubt that the US CPI data later today is going to dominate investor focus today but there are a couple of potential banana skins on the event risk calendar that could see markets move before we hit the US session. NAB Business Confidence data is due out in the APAC session and Aussie traders will be paying close attention to that. In the European session, we have the first of some major UK data releases this week in the form of the employment numbers – the expectation is for a 15k change in the Claimant count and for the unemployment rate to remain at 4.2%. But the main event comes in the US session and that key CPI release and traders are expecting plenty of volatility around it.