The AUD is the strongest and the CHF is the weakest as the markets jockey for position ahead of the US CPI at 8:30 AM ET. The USD is a bit weaker but price action is relatively muted today as it is time to see - and then believe. The number will tee-up the Fed tomorrow. If inflation dips, the game plan of slowing the pace of tightenings continues with 50 bps tomorrow and 25 likely in forthcoming meetings into early 2023 - dependent on other data ahead to determine the terminal rate. If the number is stronger, the game plan might still remain with 50 followed by 25 ahead, but the terminal forecasts will likely be extended out further as the Fed tries to slow the grips of inflation.
As Justin pointed out, the market is hungry for the end of this year+ long inflation runup, and searching for the pivot to change the storyline, but as evidenced with the PPI last week, this bout of inflation is like a cold that lingers and lingers. There are pockets of declines but employment remains tight in the service sector (helped by demographic shifts as baby boomers leave the working population) and that could keep that sector and wages moving higher (which in turn feeds on down at least part of the jobs line). The good news for inflation recently is the financial and tech sector seems to be getting hit which are high paying jobs. So there is a wave going higher from the tight lower paying jobs and a wave going lower from the higher paying financial and tech sector jobs. That might be comforting to the Fed.
A look at the markets ahead of the report are showing:
- spot gold is trading up $7 or 0.39% at $1787.23.
- Spot silver is trading up three cents or 0.14% at $23.32
- WTI crude oil is trading up $0.20 at $73.52
- Bitcoin is trading higher at $17,424
in the premarket for your stocks, the major indices are trading higher looking for a better number:
- Dow Industrial Average is trading up 213 points after soaring 528.57 points yesterday
- S&P index is trading up 25 points after yesterday's 139.12 point rise
- NASDAQ index is up 76 points after yesterday's 139.12 point rise
the European equity markets, the major indices also trading higher:
- German DAX +0.77%
- France's CAC +0.73%
- UK's FTSE 100 +0.26%
- Spain's Ibex +0.40%
- Italy's FTSE MIB +1.0%
In the US debt market, yields are lower, also looking for a Christmas present from the CPI:
in the European debt market, the benchmark 10 year yields are mixed:
