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CPI (Scenarios and Affect )United States - Consumer Price Index CPI-Consumer Price Index quantifies the rate of inflation (ie the rate of change in prices) from the perspective of consumers when they purchase goods and services. The upward trend has a positive effect on the country's currency, USD. The consumer price index is one of the most watched indicators by currency traders and is a basic indicator for determining financial inflation and buying trends in society in the United States. The main goal pursued by the central bank is to achieve price stability. Thus when the central bank wants to fight inflation, the reaction of the bank is to raise the interest rate to help prices fall. Higher interest rates attract foreign investment, thus increasing the demand for the country's currency. The all-important U.S. consumer price index for July is due out Today, giving investors a fresh chance to judge the trajectory of inflation in the world's largest economy and update their estimates for Federal Reserve policy decisions Economists predict that the headline measure climbed by 3.3% year-on-year, accelerating from 3.0% in June. However, an atypically soft corresponding figure in July 2022 suggests that markets may not place too much importance on the quickening pace. CPI expectations for financial institutions after two hours inflation announcement: (Highest: 4.1%, Lowest: 3.1%) - Wolf Capital 4.1% - Scotia Bank 3.1% - Standard Chartered 3.1% - Goldman Sachs 3.2% - Barclays 3.2% - Canadian Imperial Bank 3.2% - HSBC 3.2% - UPS 3.2% - Bank of Montreal 3.3% - Bloomberg 3.3% - City 3.3% - Credit Suisse 3.3% - Morgan Stanley 3.3% - Royal Bank 3.3% - Visa 3.3% - JPMorgan 3.4% ⬆️ which means quiet rise ⬇️ which means quiet decline ⬆️⬆️⬆️ it means violent rise ⬇️⬇️⬇️ t means violent decline ❗️be careful and trade safe ❗️ what is your opinion ?? If this post was useful to you , don't forget to like and comment , Thanks ❤️
OANDA:XAUUSDEducation
by Arazmajeed
BluetonaFX - USDJPY Traders Anticipating US Inflation DataHi Traders! Ahead of the US CPI data in a couple of hours, USDJPY is trading with momentum, and we could finally see the 145.073 resistance level broken if the inflation outlook looks positive for the US. Looking at the 1W chart, the market looks bullish; we are above the 20 EMA; last week's high was broken; and even with the weaker than expected US jobs report announced last week, the US dollar is still showing strength. If the inflation data is stronger than expected, there is a strong possibility that the market breaks the 145.073 resistance level. Above this level is the psychological 150 level, which is the next long-term target that the market will look to test if the bullish momentum continues. Above 150 is our Apex level at 151.946, which is our record high. Depending on the outlook in the US, we may see this level at some point this year. Though USDJPY looks bullish, the market is currently in a range zone, and the resistance at 145.073 must break to confirm the bullish view. On the other side, below is the 137.915 level, which has been our strong support level over the past few months. If the inflation outlook looks weak and the bullish US dollar's bullish outlook becomes bearish, this level will be the likely long-term target level for USDJPY. Please do not forget to like, comment, and follow, as your support greatly helps. Thank you for your support. BluetonaFX
by BluetonaFX
2
USD Index road map with US CPI to come.Today's focus: USD Index Pattern – Ascending Triangle Support – 95.68 Resistance – 96.32 Today, we look at the USD index as price continues to trade rangebound after fighting back from a two-day decline. Could today’s CPI data break the deadlock and give the market some direction? Traders will be watching to see what today’s data could do for rate rise expectations. Could a move above expectations lift price above resistance and get the current trend back on track? Or could a miss to the downside confirm an LH and break the trend, setting off fresh selling? If we see the data come in flat, this could maintain the current price range that we are seeing at the moment. Keep an eye on today’s data when it’s released at 8:30 am EST, as it could produce some volatility if the figure comes out outside of market expectations. Have a great day and good trading.
EIGHTCAP:USDX
by Eightcap
Btc At Pivotal Level ,Dub The Area The Most Important Trend LineBtc At Pivotal Level, Dub The Area The Most Important Trend Line With CPi ahead and projected to Increase, will Bitcoin keep its correlation with the NASDAQ and continue to act as a high-yield beta stock? Eventually, Bitcoin could diverge from tech stocks and compete with gold or possibly even the dollar in the event of a major flight to safety. First, we have a very probable move lower bar we don't decouple from the tech correlation as the market potentially prices in a Higher for longer from the fed Cpi over 3.4 will be bad for all risk assets and push the dollar high which should be bad for high-yield things like btc Technically, we're seeing divergences In multiple oscillating indicators plus approach long-term trend line Let's see what happens, Up this post if you utilize this Idea Happy Trading!
COINBASE:BTCUSDShort
by PipsOverPast
3
Generally Up Until TuesdayWith Intermediate wave 1 likely in the books, I have projected the top for Intermediate wave 2. It won't be as high as originally thought. Minor wave A could end tomorrow or Friday and wave B could end Friday or Monday. The end looks like maybe Tuesday based on historical data. Intermediate wave 1 ended about an hour late today but the market roared after the bottom per analysis: The move up this afternoon almost ran the whole length of Minor wave A's expectation so a cool off today may continue to provide room for gains tomorrow. The inflation read still appears to be a catalyst for gains, but maybe 20-30 points early on Thursday is not a significant jump or confidence in the reported numbers which the pundits may add the context of fuel prices having gone up after the end of July. This realization should led the market down into Minor wave B temporarily and then some sort of short rally should occur Monday/Tuesday. The next drop should be another 150-300 pointer. The projected bottom for this first Primary wave 1 down right now is early October, however, based on the ending point of Intermediate wave 1, it is possible the bottom is October remains above 4050 AND the final market low toward the end of 2024 could remain above 3100 based on the analysis here:
SP:SPXLong
by StockSignaler
Gold Price At A Critical Support Level – After Steady DeclineGold Price – Technical Outlook Daily Chart After experiencing careful declines since mid-July, gold price is currently positioned directly on the ascending trendline originating from February, as depicted in the chart below. If this trendline is breached, it could pave the way for a more pronounced bearish technical outlook. This scenario would potentially reveal the 38.2% Fibonacci retracement level at 1903, which notably coincides with the lows observed in June. 4-Hour Chart The 4-hour chart provided below offers a clearer view of the recent short-term downtrend. A descending trendline is serving as a consistent support, facilitating a gradual decline in price. Notably, there is a positive divergence in the Relative Strength Index (RSI), which suggests that the downward momentum is diminishing. This observation coincides with XAU/USD testing the 61.8% Fibonacci retracement level within this specific timeframe. However, for a potential return to a short-term bullish technical outlook, it would be essential to surpass the 1932 resistance level. Alternatively, if bearish momentum continues downward, the next area of support to watch out for would be 1898 and 1867
FOREXCOM:XAUUSD
by imxoxo
What Disinflation - Beef Price Went Up 64 percent in 5 YearsCME: Live Cattle ( CME:LE1! ), Lean Hog ( CME:HE1! ) Last month, the Bureau of Labor Statistics (BLS) reported that US inflation on food items was 5.7% in June, exactly half of its peak of 11.4% in August 2022. Food inflation is at its lowest level since November 2021. Under the sub-category “Meats, poultry, fish, and eggs” from Food-at-home, the BLS data shows a negative 0.2%, meaning that meat prices declined in the past year. The official data contradicts my own experience. Anyone who has been shopping knows that the grocery bill gets bigger every month. Last weekend, I surveyed the Beef section at a local Walmart and found the following: • Beef cuts with the USDA Choice label price between $12-$18 per pound. • A primal loin, for example, costs $16.99/lb. Next to Beef is the Pork section. • A full slack of spareribs prices at $1.89/lb. • This is back to the pre-Covid price level. Why is beef so pricy? Will consumers get some relief as food inflation goes down? In this report, I attempt to find out what drives the beef/cattle price up. The Cash Cattle Market According to the National Daily Cattle & Beef Summary published by the USDA, Choice Beef averaged $301.79/cwt (per 100 pounds) nationwide on August 4th. Primal loin cutouts averaged $4.11/lb. This is so much lower than the retail price. But why? The USDA reports transactions occurred at meatpackers, where cattle farmers sell their beef cows. The report shows the value chain throughout the packing process: • Live Cattle: Steer (male cow), 187.55/cwt; Heifer (young female), $187.26/cwt; • Beef Carcass: $284.86 (Choice); • Primal Flank: $214.84 (Choice); • Primal Rib: $457.54 (Choice); • It also lists prices for Chuck, Round, Brisket, Short Plate, Trimmings, etc. From the packing plant, beef goes through cold storage, wholesale, and retail distribution before consumers pick up their favorite meat at the grocery store. During the inflationary period, labor and energy become more costly, driving up the cost of each stage of processing and distribution. Higher interest rates also raise the cost of business overhead. These together widen the price spread between live cattle and retail beef cutout significantly. In the beef cattle value chain, it takes farmers two years to raise the cows, while processing and distribution take maybe two weeks to complete. However, farmers receive only about 20% of the final sales price. The Cattle Cycle and A Shrinking Herd Cattle cycle is the process in which the size of the national cattle herd changes over time, from low point to low point. The cattle cycle averages 8–12 years and is influenced by the cattle prices, input costs that drive producer profitability, the gestation period, the time needed for raising calves to market weight, and climate conditions. If cattle prices and producer profits are expected to rise, producers may expand their herds; if prices are expected to decline, producers will reduce their herds by culling older cows and keeping fewer heifers to replace older cows. Cow-calf producers’ response to price fluctuations may be delayed because of the lengthy gestation period for cattle relative to hogs and poultry. The total number of beef cattle in the United States is highly dependent on the stage in the cattle cycle. Last month, the USDA reported that the latest herd inventory for all cows and calves was 95.9 million, down 3% year-over-year. Beef cow inventory was 29.4 million, also down 3%. The decline in beef cow supply is the main driver for higher beef prices. Over the past 50 years, the US cattle herd has shrunk significantly. • Inventory for all cows and calves peaked at 132 million in 1975. We have lost over 36 million cows or 27% of all cattle supply. • Beef cattle inventory peaked at 45.7 million. We now have 2/3 of peak herd size. A counter argument is that, with technology advancements, we need fewer cows for the same amount of beef supply. The production time gets shorter, and the cows gets bigger. People now have healthier diets and take in less red meat. According to USDA data, per capita beef consumption was 63.3 pounds in 1960. It declined to 59.1 pounds in 2021, down 6.6%. But look at the huge population growth for people. The US had 203.2 million people according to the 1970 Census. US population grew to 331.4 million in the 2020 Census, up 63%. Beef demand clearly outpaced supply as US population grows. Beef Export and Import Interestingly, the US both exports and imports beef. In 2021, the US exported 3.43 billion pounds of beef while imported 3.35 billion pounds. Beef export was mainly higher-grade beef cutouts. And import was lower-grade beef for processing into ground beef. The US used to be a net import country for beef. In 2020, China signed a trade agreement with the US and opened its vast market for US beef import. This resulted in China buying four times as much beef the following year. More export reduces domestic beef supply. This is another factor driving up beef prices. In conclusion, the days of lower priced beef are long gone. Beef prices are expected to remain high, even though food inflation goes down. Cattle and Hog Spread Trade – A Revisit How could we make use of this analysis? On May 15th, I published an idea about a spread trade between CME Live Cattle Futures ( NASDAQ:LE ) and Lean Hog Futures ( NYSE:HE ). The 20-year chart shows that the price spread between live cattle (LE) and lean hog (HE) broadly stays in the range of $20-$60 per 100 pounds but could go up to as high as $100. On May 12th, October cattle contract (LEV3) was quoted $166.2 per 100 lbs., while October hog contract (HEV3) priced at $77.425. Thus, the price spread was $88.775. On August 4th, LEV3 settled at $183.10 while HEV3 was closed at $83.25. The spread has widened to nearly $100. The Impact of Proposition 12 In 2018, California passed an animal welfare law called Proposition 12. It requires that breeding pigs be confined to a pen with no less than 24 square feet of floor space, allowing them to fully turn around in their living area. Proposition 12 applies to not only hog farmers in California, but also any supplier selling hog and pork in the state of California. The hog industry fought hard but lost. The Supreme Court upheld the law in May, and it is finally taking effect in July. The animal welfare law significantly increases the cost of hog production nationwide. Prices of live hog, pork cutout, ham and bacon shall all go up. However, as we are now in summer, a low pork consumption season, cash market price has not yet caught up. In my opinion, the cost factor pushing pork prices up in the short run is greater than the supply-demand force that drives up beef prices in the long run. There may be room to short the cattle-hog spread, until pork prices stabilize in a new equilibrium. A Short Spread trade entails selling 1 CME Live Cattle Futures and buying 1 CME Lean Hog Futures. Both contracts are based on 40,000 pounds of meat and require $1,600 in initial margins. Happy Trading. Disclaimers *Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services. CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
CME:LE1!Short
by JimHuangChicago
26
NQ1! Supply and Demand Levels 8/6/23 (15MIN TF)Link to chart: www.tradingview.com Looking at the higher timeframe, we hit a ceiling of multiple rejections to the upside. On the /ES, we tapped into the 2022 highest resistance and we were immediately shut out. Coming into this week, we do have important news that can rampage the numbers and volatility. I am not planning to trade much but I wanted to share the levels on my chart that I am watching. Based on the pattern formations we can have a double top on the daily or a double bottom on the 4HR, and with news it may push 1-3% change. Following the pivot points on the 4HR as well. EOW Possibilities: BULLS: 15735-15900 BEARS: 15020-15166
CME_MINI:NQ1!
by tradeswithjess
AUDUSD will buyer momentum continue?Today's focus: AUDUSD Pattern – HL Possible targets – 68.11 – 68.85 Support – 67.17 Resistance – 67.75 Could we see further upside from the AUDUSD? Currently price is bouncing off short-term support. This could continue if some of this week's key news goes in favour of risk markets. The USD has had a solid run recently but could any hints at future rant holds set off a new pullback? If so this could be fuel for the AUD to continue its push. Australian CPI is also due out on Thursday, its forecast to come in slightly lower Could a miss also help drive buying? For now, we will continue to watch price as it holds off short-term support with a new HL and see if it can continue to push higher reclaiming some of last week's lost ground. Have a great day and good trading.
Long
by Eightcap
So… how’s that deflation narrative looking?We’ve become so accustomed to headlines of ‘peak inflation’ and falling input prices that some have been throwing the wonderful ‘deflation’ word around. And we think most would enjoy a bit of deflation, as that would result in lower interest rates. However, with commodity prices (particularly oil) being a key driver of inflation, a lot of the softness can be tied back to the underperformance of commodities over the past 12 months. Supply chain disruptions have also been in the rear-view mirror and no longer a concern (or are they?) Over 30,000 UPS workers are vowing to strike if a new pay deal is not negotiated by 1 August, which should throw a nice spanner in the works of the US (and global) parcel delivery system. Russia has pulled out of a key grain deal and is bombing Ukraine ports to derail trade in the Black Sea. And India has banned rice exports (apart from Basmati) to fight domestic inflation, adding to fears of another round of food inflation. It is therefore worth noting that the Thomson Reuters CRB commodities index is seemingly breaking out of a 12-month retracement on the monthly chart. Furthermore, the retracement lasted 11 months before June’s small bullish candle, so the broad commodities index may have bottomed in May at -19.8% y/y. And assuming this is the breakout of a falling wedge, it projects a target around the 329.60 high. But if it were deemed a bull flag, the target sits around 365. And what do we think will happen to consumer prices further down the track? Of course, they will begin to rise again. And the worrying fact is that inflation tends to come and go in waves, so if commodities continue to rally then it looks like the next wave of rising y/y inflation is pending.
TVC:TRJEFFCRBLong
by CityIndex
Deciphering Divergent Signals The Complex Economic LandscapeThe global economy continues to face profound uncertainties in the wake of COVID-19's massive disruptions. For policymakers and business leaders, making sense of divergent signals on jobs, inflation, and growth remains imperative yet challenging. In the United States, inflation pressures appear to be moderately easing after surging to 40-year highs in 2022. The annual Consumer Price Index (CPI) declined to 3% in June from the prior peak of 9.1%. Plunging gasoline and used car prices provided some consumer relief, while housing and food costs remained worryingly elevated. Core CPI, excluding food and energy, dipped to 4.8% but persists well above the Fed’s 2% target. Supply chain improvements, waning pandemic demand spikes, and the strong dollar making imports cheaper all helped cool inflation. However, risks abound that high prices become entrenched with tight labor markets still buoying wages. Major central banks responded with substantial interest rate hikes to reduce demand, but the full economic drag likely remains unseen. Further supply shocks from geopolitics or weather could also reignite commodity inflation. While the direction seems promising, the Fed vows ongoing vigilance and further tightening until inflation durably falls to acceptable levels. The path back to price stability will be bumpy. Yet even amidst surging inflation, the US labor market showed resilience through 2022. Employers added over 4 million jobs, driving unemployment down to 3.5%, matching pre-pandemic lows. This simultaneous inflation and job growth confounds historical norms where Fed tightening swiftly slows hiring. Pandemic-era stimulus and savings initially cushioned households from rate hikes, sustaining consumer demand. Early retirements, long COVID disabilities, caregiving needs, and possibly a cultural rethinking of work also constricted labor supply. With fewer jobseekers available, businesses retained and attracted talent by lifting pay, leading to nominal wage growth even outpacing inflation for some months. However, the labor market's anomalous buoyancy shows growing fragility. Job openings plunged over 20% since March, tech and housing layoffs multiplied, and wage growth decelerated – all signals of softening demand as higher rates bite. Most economists expect outright job losses in coming months as the Fed induces a deliberate recession to conquer inflation. Outside the US, other economies show similar labor market resilience assisted by generous pandemic supports. But with emergency stimulus now depleted, Europe especially looks vulnerable. Energy and food inflation strain household budgets as rising rates threaten economies already flirting with recession. Surveys show consumer confidence nosediving across European markets. With less policy space, job losses may mount faster overseas if slowdowns worsen. Meanwhile, Mexico’s economy and currency proved surprisingly robust. Peso strength reflects Mexico’s expanding manufacturing exports, especially autos, amid US attempts to nearshore production and diversify from China reliance. Remittances from Mexican immigrants also reached new highs, supporting domestic demand. However, complex immigration issues continue challenging US-Mexico ties. The pandemic undoubtedly accelerated pre-existing workforce transformations. Millions older employees permanently retired. Younger cohorts increasingly spurn traditional career ladders, cobbling together gig work and passion projects. Remote technology facilitated this cultural shift toward customized careers and lifestyle priorities. Many posit these preferences will now permanently reshape labor markets. Employers clinging to old norms of in-office inflexibility may struggle to hire and retain talent, especially younger workers. Tighter immigration restrictions also constrain domestic labor supply. At the same time, automation and artificial intelligence will transform productivity and skills demands. In this context, labor shortages could linger regardless of economic cycles. If realized, productivity enhancements from technology could support growth with fewer workers. But displacement risks require better policies around skills retraining, portable benefits, and income supports. Individuals must continually gain new capabilities to stay relevant. The days of lifelong stable employer relationships appear gone. For policymakers, balancing inflation control and labor health presents acute challenges. Achieving a soft landing that curtails price spikes without triggering mass unemployment hardly looks guaranteed. The Fed’s rapid tightening applies tremendous pressure to an economy still experiencing profound demographic, technological, and cultural realignments. With less room for stimulus, other central banks face even more daunting dilemmas. Premature efforts to rein in inflation could induce deep recessions and lasting scars. But failure to act also risks runaway prices that erode living standards and stability. There are no easy solutions with both scenarios carrying grave consequences. For business leaders, adjusting to emerging realities in workforce priorities and automation capabilities remains imperative. Companies that embrace flexible work options, prioritize pay equity, and intelligently integrate technologies will gain a competitive edge in accessing skills and talent. But transitions will inevitably be turbulent. On the whole, the global economy's trajectory looks cloudy. While the inflation fever appears to be modestly breaking, risks of resurgence remain as long as labor markets show tightness. But just as rising prices moderate, the delayed impacts from massive rate hikes threaten to extinguish job growth and demand. For workers, maintaining adaptability and skills development is mandatory to navigate gathering storms. Any Coming downturn may well play out differently than past recessions due to demographic shifts, cultural evolution, and automation. But with debt levels still stretched thin across sectors, the turbulence could yet prove intense. The path forward promises to be volatile and uneven amidst the lingering pandemic aftershocks. Navigating uncertainty remains imperative but challenging.
TVC:US10YEducation
by BitcoinMacro
5
Harmonically, US Interest Rates are Headed Toward 35%The US Interest Rate chart has been trading within a Descending Broadening Wedge and has recently broken out of the wedge. The target for a pattern like this is typically back to the inception of the pattern, which in this case would be 20%; but we also have an additional variable here, and that's the Potential Logscale Harmonic Formation we've made here. If we are to treat the action of this chart as we'd treat any other chart, then we'd expect that once B gets broken, we'd get an accelerated move all the way up to the Harmonic Completion of a Bearish Shark, which would land us at the 1.13/1.618 Harmonic Confluence Zone up at around 34-35% There have been previous instances where Harmonics have had a predictive quality over data like this, such as the accelerated liquidity exit out of the reverse repo facility, the bond yield charts on multiple occasions, and the US Inflation Rate Charts. Which can all be seen in the related ideas tab if you are skeptical of my use of Harmonic Patterns in this context.
ECONOMICS:USINTRLong
by RizeSenpai
More Downside for DXY?Last week's US Consumer Price Index (CPI) release of 3% (Forecast: 3.1% Previous: 4%) indicates that inflation growth has slowed significantly, likely due to the compounded effect of aggressive interest rate hikes from the Federal Reserve. This slowdown in inflation growth has also improved market sentiment that the Fed Funds Rate has reached its peak at 5.25% and the likelihood for further rate hikes has diminished. With the DXY breaking below the round number level of 100 and reaching a low, last seen in April 2022, further downside can be expected. However, watch out for the possibility of stronger-than-expected US retail sales data. A sustained rebound is unlikely, with the 100.85 resistance level likely to cap the upside potential. Confirmation of further downside could be signaled if the price breaks below 99.45, with the price likely to trade toward the next key support level at 97.75.
TVC:DXYShort
by JinDao_Tai
2
17/07/23 Weekly outlookLast weeks high: $ 31843.6 Last weeks low: $30858.7 Midpoint: $29873.8 Post CPI week and BTC finds itself back within the same local range despite some very positive news coming from the SEC VS Ripple case. Alts rallied upon the news but BTC was capped at 31.8K, still short of the 32.5k target. I do believe that was bitcoins best chance to break above the range, the daily close on Friday 14th was a bearish engulfing and that is a worry for the bulls as all the progress from the SEC news got retraced and some... This could be the start of bitcoin unwinding should we lose the range bottom around 29.5k, the target would be to fill the inefficiency FVG around 27k before another attempt at that local high.
by ProR35
Gold Outlook: Vulnerable Dollar and Promising Upside PotentialHey Traders, In tomorrow's upcoming trading session, our keen focus will be on XAUUSD, the trading pair of gold against the US dollar. We are closely monitoring this market for a potential buying opportunity within the price range of approximately 1940. From a technical standpoint, XAUUSD is currently engaged in an upward trend and undergoing a consolidation phase, gradually approaching the key level of support and resistance at 1940. Furthermore, it is important to consider the fundamental factors influencing this market. The latest Consumer Price Index (CPI) data indicated a softer performance, implying that future monetary policies are likely to adopt a more dovish stance. Additionally, the Producer Price Index (PPI) also displayed a similar softness. These factors combined have generated an increased appeal for gold and cryptocurrencies among investors. Given this context, the convergence of favorable technical indicators and supportive fundamental factors enhances the attractiveness of gold and cryptocurrencies as investment options. Thus, we anticipate a heightened interest from investors in exploring opportunities within the XAUUSD market, particularly around the 1940 zone.
OANDA:XAUUSDLong
by JoeChampion
16
The end of the tightening cycle is nighThe decline in the US inflation rate to more than a two-year low, marks a major step towards the end of the Fed’s historic monetary tightening cycle1. We believe key deflationary forces are in play – (1) weaker commodity prices (2) improvement in global supply chains (3) moderation in demand (4) lower inflation expectations. Therefore, the June decline in inflation is just the start of a series of decreases. Softer than expected inflation report As highlighted in the chart below, the details for June were also better than expected with key measures of underlying inflation coming in below forecasts. The inflation report suggests that some of the stickier components of inflation such as used cars and airline fares are also moderating. It’s important to note that most of the rise in the June CPI can be attributed to housing, however because of the way it is calculated it tends to lag current conditions. The S&P Case Shiller Home Price Index which tends to lead CPI shelter by roughly a year, is already flat which highlights US inflation is likely headed lower. Inflation for labour intensive services such as restaurants, recreation and personal care remained higher in June reflecting the pass -through of higher wages and robust services demand2. Potential further softening in the labour market could bring these categories back to target consistent levels. Softening in the labour market was evident in June’s employment report (nonfarm payrolls rose by 209k versus consensus 230k) which was weaker than expected for the first time in 15 months3. US Producer Prices confirmed a similar deflationary theme. The US Producer Price Index (PPI) inflation for June was softer than expected with headline and core PPI advancing 0.1% over the prior month4. Business surveys are also pointing to weakening pricing power, such as the Institute of Supply Management (ISM) services index which ties in with a lower inflation backdrop. US inflation can’t prevent the July rate hike While expectations for the July rate hike of 25Bps remain firmly in place, the market has scaled back expectations for a second hike – with 21bps / 3bps / 3bps of hikes priced for the July / September / November FOMC meetings5. The disinflation trend increases our belief that the Fed is close to, or will be, at the end of the current rate hike cycle. Earnings take centre stage for the next leg of the rally The key question now remains whether the market continues to trade off expectations of an easing narrative. Central bank policy has been the biggest drag for equities last year. The timing of the easing narrative comes at the heels of a volatile Q2 2023 earnings season. The S&P 500 Index earnings in the Q2 2023 are expected to decline 6.8% y/y, worse than the decline of 3.9% in the Q1 20233. This would be the largest earnings decline since the pandemic-fuelled 31.6% y/y decline in the Q2 2020. Earnings will be the key deciding factor for an extension in the current rally. Investors will be keen to hear from management whether they are looking to adopt a leaner cost structure and ways they are looking to remove excess capacity. Investors will be looking for guidance on productivity and efficiency gains rather than the financial engineering we have witnessed over the past decade. This material is prepared by WisdomTree and its affiliates and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date of production and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by WisdomTree, nor any affiliate, nor any of their officers, employees or agents. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of future performance.
FRED:DFF
by aneekaguptaWTE
1