CPI data yesterday moved the markets aggressively as Core CPI increased 0.9% month on month the highest in nearly 12 years. The result being that the Fed’s inflation target of 2% for the year end being breached as current inflation is sitting on 2.6%, resulting in investors estimating that an interest rate hike might take place sooner than expected. It was evident that there was a significant risk off approach taken as Bond yields jumped from 1.61 to 1.70 post CPI data being released.
The resulting Risk off approach taken caused a huge negative day in the US equity markets as Nasdaq, Dow and S&P sold off aggressively. The resulting data did have an effect on European indices however it did result in more of a ranging market rather than a negative one as the FTSE and the Dax closed close to yesterday’s opening prices.
USD strength carried over into the commodity markets as we saw a decline in Gold, Silver as well as Brent, causing the resources market to come back to their daily support levels. Gold seemingly held support on 1816, as the increase in inflation should traditionally be a bullish driver for the precious metal. The Colonial Pipeline started the process of restarting following the pipeline being hacked ending the six day shutdown, the result being that the increase in supply, as Brent rallied to 69.72 to sell off in the asian session.
Elon Musk announced last night that Tesla will suspend the use of Bitcoin to purchase cars driving prices down to 45 500 in a couple of hours in this morning’s Asian session.
Prior to the European open Euro strength and GBP weakness was evident in the markets, with the resulting inflationary fears we could get some more Dollar strength come into the markets during the course of the week. Take note that today is a banking holiday in Germany, France and Switzerland.
All Day - Bank Holiday (CHF, German, French)
2:30pm - Unemployment Claims (USD)
5:00pm - BOC Gov Macklem Speaks (CAD)
Due to speak at an online event hosted by the Bank of Canada
7:01pm - 30-y Bond Auction (USD)