US futures are trading lower as investors remain wary to support riskier assets ahead of the week’s most crucial economic reading: the US CPI figure. It is generally expected that if the inflation figure remains persistent, the American equities market would suffer a major fall today. The Fed has been working hard to keep inflation under control, and they have raised interest rates in the face of a serious danger, the US financial crisis. Traders fear that if US inflation does not improve significantly, the S&P 500 might fall by 2% today. Considering that the S&P 500 is trading quite near to its 50-day SMA on a daily chart, a break below this moving average would simply exacerbate the selling impact.
US CPI and Fed Minutes
The Fed Minutes are another major event that is keeping traders on their toes today. Obviously, these minutes will be issued after the US CPI data, which implies that any overreaction to the US CPI statistic may be mitigated when the Fed publishes its minutes. This is because the Fed’s monetary policy position has shifted somewhat, and their rhetoric isn’t what it used to be, particularly when we consider the Fed Chairman’s speech before the US banking committee prior to the collapse of Signature Bank or Silicon Valley.
US CPI and Fed’s Interest Rate
The Fed is fully aware that by maintaining the fire beneath the pot, the stew has been overdone, which is undesirable. When we look at the terminal rate, it seems that the Fed’s terminal rate for the end of this year will most likely remain around 5%. Many market speculators think that the Fed will suspend its interest rate cycle because it has posed a significant danger to the American financial sector. But, factors such as increased oil prices will prevent the Fed from approving a shift in monetary policy.
Cross Roads With US CPI
The fact is that Jerome Powell’s position has reached a crossroads, and he must decide if the Fed is willing to make the trade-off between price stability and financial stability. The fact that the IMF continues to provide bleak forecasts for the global economy, none of which reflect positive possibilities, exacerbates the problem.
Forex
Currency traders will also be watching the Bank of Canada’s monetary policy announcement today. The bank has reached a stage where it is likely to halt the rate hiking cycle, and the interest rate is projected to stay at 4.50% in today’s announcement. The USD/CAD pair will be the most fascinating to follow among forex traders, and the dollar remains a stronger contender here, which means that the dollar index is more likely to gain strength versus the Canadian currency.
Gold
Gold prices have remained above the $2,000 mark, which is a very crucial price milestone for many traders. This support is quite likely to be challenged today, particularly considering that the US CPI and Fed Minutes are on the economic calendar. From a trading standpoint, speculators are likely to find gold prices more appealing if the gold price retraces and goes below $2,000. Many traders now feel that the path of least resistance for gold prices is heavily skewed to the upward, and that any correction in gold prices is more likely to be a chance to get a good deal.
Cryptocurrency
It is evident to crypto entrepreneurs that US politicians are looking for bad actors, which we feel is great for the crypto market. But, Hong Kong’s recent emergence as a crypto-friendly state may alter the game. Binnance US has previously said that it would delist Tron from its platform while maintaining it on other exchanges. Tether, the largest crypto-stable currency, may begin to choose Hong Kong as the primary location for its operations, and we may see other firms, such as Circle, depart the US in favour of Hong Kong.
From the standpoint of Bitcoin, none of this matters; the rally is on and the momentum is here to stay, as the price has penetrated a major price level of 30K, and the next big barrier is at 50K.
