US CPI was the big event of the day and also the big event of the week. Month-over-month data showed an increase of 0.3% in both headline and core. On a year-on-year basis, the core fell to 3.9% compared to 4.0% in the previous month, but was higher than the expected 3.8%. Composite CPI YoY rose from 3.1% to 3.4% (beating expectations of 3.2%). Shelter, which the market was expecting to fall, rose 0.4%. Year-over-year shelters are still up at 6.2%, but lower than last month's 6.5%. Services excluding rent increased 0.6% month over month and 3.5% year over year.
Overall, inflation is becoming more persistent.
The US dollar initially rose following the release of the data, but the trend reversed by midday and towards the close.
Looking at the US bond market, yields initially rose, but reversed and fell on the day. i.e.:
- The two-year Treasury yield rose to a high of 4.394% before reversing to trade at its current one-hour low of 4.253%. The yield on the day was -11.8 basis points.
- The 10-year Treasury yield rose to a high of 4.068% before reversing to a low of 3.97%, down -5.9 basis points.
- The 30-year bond yield rose to a high of 4.247% before falling to 4.167%. The current yield has fallen -2.1 basis points since that date.
In foreign exchange, the ups and downs seen recently continued today despite rising CPI data and initial gains in the US. Dollar prices ended the day mixed, but the dollar rose significantly before falling towards the close.
Strongest against weakness in major currencies
Overall, the Japanese Yen is the strongest of the major currencies. CHF is the weakest (see ranking above).
Comparing major currency pairs with the US dollar:
- The EURUSD rose to a high close to last Friday's high of 1.0998 before the CPI, and fell to support near 1.0929 after the CPI. Towards the day's close, the price was trading at 1.0971.
- USDJPY rose to a high of 146.40, above the 50% midpoint of the decline from the November high. Due to this decline, the price is currently trading at 145.38, over 100 pips off the high.
- Before the data was released, GBPUSD fell to 1.2689, briefly above the highs of around 1.2771 on December 29th and January 5th (it reached a peak of 1.2778). Since the price bottomed out, it has now reversed to 1.2765, just 13 pips shy of the previous high.
On this day, central bank officials, including Richmond Federal Reserve President, Richard Barkin, and Chicago Federal Reserve President, were active. Goolsby and ECB President Lagarde have been exchanging views on economics and policy.
Richmond Fed President Barkin said:
Barkin, a senior Fed official who will become a voting member in 2024, noted that the current improvement is largely limited to the goods sector, with inflation heading toward the Fed's 2% target. emphasized the need for convincing evidence that He remains open to cutting interest rates if inflation is in line with target, acknowledging that banks may prefer higher liquidity levels post-pandemic. Despite the latest CPI data meeting expectations and suggesting inflation will be moderately contained, Barkin said a “disconnect” between services and shelter costs continues. . He emphasizes the importance of broad-based inflation improvements beyond goods, recognizing new-found pricing power in the services sector, which faces pushback from consumers and competitors. It may last until.
Barkin doesn't expect inflation expectations to align with the Fed's target anytime soon, noting that core PCE has been within target in recent months. He remains cautious, refraining from predicting the outcome of future Fed meetings, and does not see current inflation expectations rising. Mr. Barkin's commentary focuses on a wide range of economic indicators and trends and reflects his cautious approach to monetary policy adjustment.
Chicago Fed President George Goldsby said:
In an exclusive interview with Reuters, Chicago Fed President Austin Goolsby highlighted several key risks and outlooks for the Federal Reserve's current monetary policy and economic outlook. He pointed to persistent housing inflation and potential supply shocks as significant risks to the economy. Regarding policy adjustments, particularly quantitative tightening (QT), Mr. Goolsby expressed a preference for assessing the stability and effectiveness of an “autopilot” approach and setting a higher threshold for change. He will defer to the Fed chair regarding the timing of discussions on QT adjustments.
Goolsby also cited other concerns, including the possibility that Fed policy is too restrictive and the risk of a rapid deterioration in the labor market. He observes that, unlike a year ago, the risks to the economy's “golden path” are now more balanced, rather than solely focused on the risk of overheating.
For now, he believes the Fed is still on this “golden path,” but acknowledges the possibility of derailments. As inflation declines, the Fed will need to reassess the restrictiveness of its policy. Goolsby is refraining from getting involved in any policy decisions until he reviews additional economic data, as decisions after the next meeting in March will depend heavily on data.
On inflation, he believes inflation will continue to be a key factor in determining the timing and extent of rate cuts. Mr. Goolsby made it clear that his view of the federal funds rate is closer to the median, not the lowest, expected by Fed policymakers.
He noted that despite the challenges, the Fed is on a comfortable path and making progress toward controlling inflation. He acknowledged that CPI haven inflation remains high, which is a concern, but may not have much of an impact on the Fed's consumer spending inflation target.
Goolsby explained that while services inflation was better than expected in December, housing inflation was not as good. He said overall CPI inflation in December was broadly in line with expectations, highlighting 2023 as a notable year for inflation decline.
ECB President Lagarde
Meanwhile, ECB's Lagarde also spoke, expressing confidence in the European Central Bank's response to inflation. Lagarde said the ECB had effectively “won the battle” against inflation and needed to persist to complete the task at hand. She believes that the most difficult stage regarding inflation has been overcome. This optimism also applies to the situation at the Suez and Panama canals, which she sees as under control and unlikely to have a significant impact on prices.
Lagarde expects eurozone inflation to stabilize at 1.9% by 2025. However, he acknowledged that there is a trade-off between combating inflation and economic growth, suggesting that efforts to curb inflation could lead to slower growth. He is positive that salary increases are currently outpacing inflation, suggesting there is some comfort for consumers. As for interest rates, Lagarde believes they have peaked, but cannot predict when they will fall. He stressed that any decision to cut interest rates would depend on data showing that inflation is progressing in line with the ECB's expectations. This cautious approach underlines the ECB's commitment to ensuring long-term economic stability in the face of an uncertain global economic situation.
As U.S. traders consider exiting for the day, here's what to look for in other markets.
- Crude oil rose, but regained some of its gains toward the close. All prices rose early in the session due to tensions in the Red Sea, but then returned to decline. Remember yesterday? U.S. crude inventory data showed oil, gas and distillate inventories rose more than expected. Concerns about global growth and production cards are all themes that keep prices essentially between $69 and $74. In the current process, it is trading at $72.14, up $0.76 or 1.06%.
- Gold price remains almost unchanged at $2,025.79. It rose $1.64 (0.09%).
- Silver is trading at $20.69, down $0.18 or -0.79%.
- This coin is trading for $46,889. Near the start of US trading, the digital currency's price was trading at $47,448.The long-awaited arrival of Bitcoin ETF
In the US stock market, major indexes closed almost unchanged. The Nasdaq closed slightly higher, extending its winning streak to five days. The S&P ended its four-day winning streak. The Dow Jones Industrial Average also rose slightly. The final numbers are:
- The Dow Jones Industrial Average rose 15.29 points (0.04%) to 37,711.03. For the week, the index rose 0.65%.
- The S&P index fell -3.23 points (-0.07%) to 4780.23. For the week, the index rose 1.77%.
- The NASDAQ index rose 0.53 points (0.0%) to 14,970.18.Nasdaq index rose 3.07% for the week
Major indexes fell in Europe today.
- Germany's DAX is -0.86%. For the week, the index fell -0.28%.
- France's CAC is -0.52%.The index fell -0.45% this week
- UK FTSE 100 -0.98%. This week's index is -1.47%.
- Spanish Ibex -0.62%.The index fell -1.57% this week
- Italy FTSE MIB -0.66%. Weekly mixdown -0.51%
Tomorrow, following today's CPI data, US PPI data will be released. Additionally, a financial-led earnings calendar for the final quarter of 2023 will be released. All banks below will be released prior to opening.
- city corp
- JP Morgan Chase
- american bank
- wells fargo
- BNY melon
Other financial institutions are scheduled for next week.
- Tuesday: Morgan Stanley, PNC, Goldman Sachs
- Wednesday Citizens Financial Group, US Bancorp, Discover
- Thursday: Key Bank, M&T Bank, Trust, Northern Trust
- Friday: State Street, Comerica, Alley.
Thinking about other upcoming earnings releases? Below is a summary of earnings calendars for some major companies.
- January 23: Netflix, 3M, Intuitive Surgical, Verizon, Johnson & Johnson, P&G
- January 24th: Tesla, IBM, servicenow
- January 25: Intel, Southwest Airlines, Northrop Grumman
- January 26th, Caterpillar, American Express
- January 30: AMD, Pfizer, GM, UPS, Stryker
- January 31st: Microsoft, Mastercard, Boeing, Phillips 66, Boston Scientific
- February 1st: Apple, Meta, Alphabet, Merck, Honeywell, Amazon
- February 2: Chevron, Exxon
- February 5th: McDonald's
- February 6th: Ford, Chipotle
- February 7th: Walt Disney, PayPal, McKesson
- February 8: ConocoPhillips
- February 9th PepsiCo
Thanks for your cooperation. Good luck with your trading (even in such a volatile market).
