Stock Market Today
The US and European futures are trading in positive territory after recording heavy losses throughout this week. The optimism in the market is backed by the news that the Biden Administration could drop Trump China tariffs which have also been fuelling consumer prices.
Nonetheless, the price action for the US and European futures is still fragile, and it is likely to remain that way as traders continue to worry about inflation and the central bank’s monetary policies. The US CPI data, which is due later in the day, will be driving the price action not only for today but will also set the tone for the rest of the week. It is widely anticipated that inflation in the US may have peaked. However, lawmakers and speculators do believe that the full influence of the Ukraine and Russia conflict is still unknown.
If the US CPI number shows weakness in its numbers today, that could change the narrative in the market quite significantly because that would mean that the Fed’s hawkish stance is close to its peak. Remember, the Fed is under immense tight pressure mainly due to higher inflation readings. And if inflation begins to show retracement from its recent high, we are likely to hear a less hawkish narrative from the Fed, strengthening the risk-on sentiment among traders.
In terms of the economic number, the most important economic data that we will get is the US CPI m/m. The number will be released at 13:30 BST, and the forecast is for 0.2%, much lower than the previous reading of 1.2%. Before this, we will also get the German Final CPI m/m, and the forecast is for 0.8%, which is the same as the previous number.
Crude and Brent oil prices are recovering their losses after two consecutive days of losses. Volatility for both benchmarks has been at the highest level since March 31, and the spreads for both Brent and WTI narrowed to their lowest level since March.
The reason for the bounce in oil prices is the opposition to Russian oil imports by Hungary. EU members are still trying their best to persuade the Prime Minister of Hungary, Viktor Orban, to agree with the rest of the block. However, traders do not believe that he isn’t going to give in that easily, keeping oil prices above the critical level of $100.
Traders also need to keep a close on the US strategic oil reserves, which fell an average of 1 million b/d last week, and this shows that such a drop isn’t significant. Its current capacity can easily meet the Biden Administration’s supply goal, at least in the short term.
The US crude inventory data will also be released later today at 15:30 BST, and the number is likely to bring higher volatility for oil prices.
Bitcoin’s price has taken some beating in the past few days, mainly because crypto traders are nervous about Terra’s UST peg with the dollar, which sank below 70 cents earlier this week. Stable coins, which are supposed to be fully backed with an equal amount of fiat, are back in the spotlight, and traders continue to show their anxiousness about them.
Terra, which has been buying Bitcoin in the last few months and had more Bitcoin than Tesla, could have sold a large amount of Bitcoin to save the UST dollar peg. Remember, this isn’t the first time that we are seeing stable coins losing their value against the dollar as a peg, so all in all, if Terra can show that it can contain the recent setback, it would only strengthen the stable coin’s market place.
As for the Bitcoin price levels, traders need to keep a close eye on the 30K support level, and any violation of this price level could trigger a further sell-off. The next support is at 25K.