Higher Than Expected US Inflation Sends Dollar

As US CPI data shows inflation declining more gently than expected, markets see a hawkish Fed, firming up the Dollar and knocking global stock markets.

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1. US CPI (inflation) data released yesterday showed annualized inflation has only slowed from 6.5% to 6.4% over the past month when a rate of 6.2% had been expected. The monthly increase was 0.5% (for Core CPI it was 0.4%). This strengthens the case for rate hikes over the near term, which has put a bid into the Dollar and caused stock markets to sell off. However, the decline in north American indices has been quite small, with the S&P 500 Index remaining above its supportive area confluent with the round number at 4100. The biggest falls in stock markets have been in Asia, notably in China where the Hang Seng Index has fallen to reach a new 1-month low price.
2. Comments from the Fed reinforced hawkish sentiment, with FOMC member Williams heavily implying the Fed has more rate hikes to make, and that driving down the rate of inflation will take more work and time.
3. The US Dollar continues to be strong, as markets are becoming more firmly convinced that the Dollar will reach a higher terminal rate above 5.25%. The greenback is trading near a 5-week high price. In the Forex market, the US Dollar and the Japanese Yen the strongest currencies right now, while the Australian Dollar is is the weakest, putting the AUD/USD currency pair in focus.
4. British unemployment data released yesterday came in a little better than expected.
5. The S&P 500 Index made a golden cross the week before last. This is typically a strong long-term buy signal, although the price has fallen since then.
6. Some commodities are performing quite well, with some continuing to rise after having recently made significant bullish breakouts, notably Sugar.
7. Daily confirmed new global coronavirus cases decreased last week for the eighth consecutive week.
8. Total confirmed new coronavirus cases worldwide stand at over 677.9 million with an average case fatality rate of 1.00%. Daily new confirmed cases have fallen to a low level not seen since June 2020.