Market Drivers – US Session, Assets React To Tuesday’s CPI

Mohamed Abdelhamid 15 February, 2023 5:34 am Forex Market, Market Update

Almost all financial markets traded with an optimistic yet cautious mode throughout the first half of the day, as investors awaited the release of US inflation figures.

Economic Data

The United States Consumer Price Index rose at an annualized pace of 6.4% in January, better than the previous 6.5% but missing the 6.2% expected.

Key Developments

Almost all financial markets struggled with the CPI data, as inflation eased, but at a slower-than-anticipated pace. That means the US Fed could keep tightening the monetary policy until achieving its 2% target. Markets moved away from high-yielding assets, with Wall Street edging sharply lower and the US Dollar surging.

Hawkish Language Back To Stage

Fed’s Lorie Logan added pressure on stocks, as she noted that “we must remain prepared to continue rate increases for a longer period than previously anticipated. Also, Fed’s John Williams noted that the work to control too high inflation is not yet done. Finally, Fed’s Patrick Harker reinforced the idea by saying they are not done, but they are likely close.

ECB’s Gabriel Makhlouf said on Tuesday that the ECB could raise rates above 3.5% and hold them there for the remainder of the year. EUR/USD traded between 1.0700 and 1.0800 to finally settle at around 1.0730. GBP/USD peaked at 1.2268 but ended the day around 1.2160. The USD/JPY pair surged to end the day above 133.00.

AUD/USD hovers around 0.6980 as market players await Reserve Bank of Australia Governor Philip Lowe’s testimony before the Senate. USD/CAD trimmed early losses and stands in the 1.3340 region.

Gold dipped to 1,843.22 but ended the day above $1,850 a troy ounce. Crude oil prices are little changed on a daily basis, with WTI changing hands at $79 a barrel.

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