Another Inflation Fix After US CPI and Core PCE
- The ASX 200 in Australia increased by 21.6 points (0.3%), currently trading at 7,307.00.
- With today’s gains, the value of Japan’s benchmark Nikkei 225 index rises to 27,409.40, a 1.1% increase over its previous close.
- A loss of 304.09 points (-1.49%) brings the value of Hong Kong’s Hang Seng index down to a current level of 20,047.26.
- The A50 Index in China has dropped by 192.15 points, or 1.42%, to 13,356.52.
UK and Europe
- The cash market in the UK is forecast to start at 7,934.72, up 27 points (0.34%) from its futures price.
- The cash market is anticipated to open at 4,276.16; now, Euro STOXX 50 futures are up 18 points (0.42%).
- The cash market is currently anticipated to open at 15,522.69.
- DAX futures in Germany are up 47 points (0.3%).
- In the US, DJI futures have dropped 27 points (-0.08%).
- The S&P 500 futures market is currently down 23.25 points (-0.19%).
- Now, Nasdaq 100 futures are down 2.25 points (-0.06%).
Kazuo Ueda, the next governor of the Bank of Japan (BOJ), disappointed hawks at his confirmation hearing. He did not challenge the status quo’s ultra-easy stance but instead joined the chorus of those who agreed.
This is still the case, even though inflation in Japan reached a 41-year high just before the hearing.
In the wake of the BOJ’s dovish stance, Japanese stock markets soared overnight. WTI prices went up for a second day, hoping that a reduction in Russian oil production would help offset the impact of rising American stockpiles.
To kick off today’s euro session, Germany will report GDP and consumer confidence at 07:00 GMT, followed by Spain reporting producer prices at 08:00 GMT.
The real attraction, though, will be the release of US PCE statistics at 13:30. It might change how people feel about bonds, equities, commodities, and currencies on the global market.
The markets are obsessed with learning more about American inflation and its implications for the Federal Reserve.
Today’s PCE data are likely more significant than before, given that inflation figures in the final Q4 GDP report were revised upwards. The probability of a 50bp Fed boost in March will increase if today’s PCE number is strong.
The most recent Michigan consumer mood poll shows interesting information on consumers’ inflation expectations.
While everyone hopes that inflation expectations will fall over the next year and the following five, recent reports of high inflation may be working against this goal.
A combination of weak PCE numbers and reduced inflation expectations is the best-case scenario. The dollar would suffer as Fed fund futures indicate a lower probability of a 50 basis point increase in March.
Whatever the case, the dollar is the center of attention right now. The demand for the dollar is likely to remain high if PCE and inflation expectations rise.
Four-hour chart of XAU/USD
Gold prices have fallen for four consecutive weeks, wiping out all of January’s gains. A strong inflation rate would help us reach our downside target of $1800, which remains a possibility. Although inflation remains low, $1820 will serve as support and a springboard. Regardless of the outcome of today’s PCE report, an important level to keep an eye on is $1820.
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