Here Is Why US Inflation Data (CPI) Is That Important Not Only For US Dollar (USD) Its Index (DXY), But Also For Stocks, Bonds And Other Assets | Conotoxia

How to fight inflation in falling markets | Saxo Bank

Today at 14:30 important macroeconomic data for the US economy will be published, which may also affect asset valuations outside the United States - we are talking about inflation data.

In March 2022, inflation in the United States rose to 8.5 percent, which was the highest reading in 40 years. The rise in prices, in turn, may have affected several market measures. First, it forced the Fed to act, as the Federal Reserve is supposed to care about price stability and should raise interest rates if prices rise. This in turn could have influenced expectations of higher USD interest rates in the future and a strengthening of the dollar to levels last seen 20 years ago. Further expectations of rising rates could lead to an increase in bond yields, where for 10-year bonds they are in the region of 3%. The increase in bond yields, expectations of further tightening of monetary policy, and shrinking of the Fed's balance sheet, in turn, are information that could adversely affect the stock market, which in the case of the Nasdaq 100 index found itself in bear market territory.

This spiral seen in many markets may continue until investors fully discount inflation, rising yields, and expectations of interest rate hikes. Interestingly, the latter had already begun to fall earlier in the week as recession fears increased. Currently, based on the federal funds rate contracts, the market is assuming a peak for hikes in mid-2023 at 3.00-3.25 percent. That's lower than the 3.5-.375 percent assumed as recently as the beginning of the month.

The determinant, in turn, of whether there is a chance of full pricing for U.S. rate hikes may be where inflation will be. If this one peaks this six months and starts to fall, the market may stop assuming very aggressive Fed action. This, in turn, could bring relief to the bond market, the stock market, and also lead to the US dollar being close to its cyclical peak. Hence, today's and subsequent data on price growth in the U.S. economy could be so important.


Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service)

Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80.77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

How to fight inflation in falling markets | Saxo Bank

Conotoxia Comments

Forex has never been just a job for us. It is our passion to create the best trading conditions for each trader. Chose us and benefit from global trusted brand.