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US CPI Data In Focus

US CPI Data In Focus

US and European futures are trading lower as traders have adopted a highly cautious approach with their risk appetite. The other gloomy picture for today’s price action comes from the IMF, which has cut the GDP forecast of the biggest economy in the world, the US. The IMF has cut the US GDP forecast to 2.% from its previous level of 2.9%. The fund also reduced next year’s growth estimate to 1% from its reading of 1.7%, predicting that the unemployment rate could increase to 4.6% in 2023. This sets the stage for plenty of pessimism and a possible lower open for the US stock market.

US CPI 

All eyes will be on one data point and one data only, the US CPI number, which will be released at 12:30 GMT today. The report will likely show consumer inflation sped up to 8.8% yearly, which will be the fastest clip since 1981 or 41 years. Although, the core inflation reading may decelerate to 5.7%.

The most important aspect of this data will be how the Fed will perceive this reading and how market players will translate this number. As for the Fed, it is highly possible that the Fed will stay on track with its aggressive monetary policy and that a strong number will only increase the odds of a rate hike of 75 basis points. Market players could see higher inflation as another threat, and we could see the risk-off sentiment flaring further. A Strong inflation reading would mean a higher interest rate, and traders and investors love loose monetary policy.

Oil 

Brent and Crude oil prices saw a serious sell-off yesterday, and the WTI traded below $96 while the Brent traded at $98 yesterday. Traders are concerned about the sharp increase in the covid-19 cases in China, worrying that this could lead to a lockdown. In addition, traders are worried about a global economic slowdown, and higher inflation readings are increasing the chances for a strong possibility of a recession taking place despite a robust job market.

On the supply side, the White House is still of the mind frame that OPEC should increase oil production, and it believes that the cartel has room to increase oil production. There are hopes that the upcoming visit by President Biden may lead to some agreement that could make Saudi Arabia increase its oil supply.

UK Election and Sterling 

In our opinion, Rishi Sunak remains the strongest candidate to run the Prime Minister’s Office as others continue to withdraw their application for the Prime Minister role. Sunak has made it clear that he wants to complete the task on hand first, bringing the inflation reading lower than discussing any potential tax cuts.

On the forex side, the Sterling is getting battered against the dollar, and there are greater chances we will see the pair breaking below the 1.19 price mark. The Bank of England’s Governor is keeping some hopes alive for the Sterling bulls as he recently mentioned that the BOE is prepared to hike rates in bigger steps, and he wants the market players to know that there is more than one option to increase the rates by 25 basis points. 

The banks aim to lower inflation at any cost, which it is determined to do.

Stocks 

Twitter, the social media stock, will be the day’s highlight as the company decided to bring Elon Musk to justice by suing him. The company wants Mr Musk to honour the deal and purchase the company for 44 billion dollars. The stock is highly likely to be an interesting one today.

Google wants to keep its costs and ambitions under tight control, and the company has decided to slow down its hiring for the rest of the year as the looming economic recession opposes a threat.