An initial rally in Wall Street eventually fizzled into the close, as Treasury yields headed higher in the aftermath of the ... - IG

Market Recap

An initial rally in Wall Street eventually fizzled into the close, as Treasury yields headed higher in the aftermath of the US Consumer Price Index (CPI) release, prompting the US dollar to pare its earlier losses.

Both headline and core US CPI surprised on the downside, which will likely provide grounds for the Fed to keep rates on hold in September, but with Fed funds rate expectations already priced heavily for an end to the Fed’s tightening process, some selling on the bounce seems to be triggered. The real-time daily inflation estimates from the Cleveland Fed also suggests that US headline inflation may continue to pull ahead further this month, which will likely keep the Fed on their toes.

For now, the US core CPI has ticked lower to 4.7% versus the 4.8% expected. On the other hand, headline inflation has seen its first increase since August 2022, rising to 3.2% from previous 3% (consensus 3.3%) on higher energy costs. Month-on-month, both registered an expected 0.2% increase.

The day ahead will leave US producer prices and consumer sentiment data on watch. A similar story is expected for US headline producer prices to reveal a 0.7% increase year-on-year from previous 0.1%, while the core aspect is expected to tick slightly lower to 2.3% from previous 2.4%. Given the lukewarm reaction to the recent CPI data, it seems that some market indecision is in place, with one to watch if market sentiments will turn to selling the bounce once more.

Higher yields have not been well-received by gold prices, which continues to head lower to its one-month low overnight after treading in its Ichimoku cloud resistance over the past weeks. The US$1,900 level may have to see some defending ahead, with previous dip-buying efforts sighted at this level. Its relative strength index (RSI) on the weekly chart is also back at its key 50 level, with any failure to defend the 50-mark potentially indicating a wider trend reversal to the downside.

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2023-08-11 02:12:09Z
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