Lower US Inflation Sends Stocks Soaring

US CPI data released yesterday came in at an annualized rate of 3.2%, compared to the expected 3.3%. This has created more dovish expectations of the Fed and sent stocks and risky assets higher and the US Dollar sharply lower.

1. Crucial US CPI (inflation) data was released yesterday showing that inflation had fallen more strongly than was expected, from an annualized rate of 3.7% to only 3.2%, when 3.3% was the consensus forecast. The data has created an expectation that the Fed has reached its terminal rate at 5.50%, and the tightening cycle is now over, with 0.50% of rate cuts now expected by July 2024. This sent US treasury yields falling sharply, while the US Dollar had its worst day in a year, reaching a new 2-month low. Stocks and other risky assets were sent strongly higher, especially in the USA, where the NASDAQ 100 Index is trading at a new 3-month high price. This inflation print may mark a major turning point in the markets by producing much stronger and more sustained risk appetite.
2. In the Forex market, the New Zealand Dollar has been the strongest major currency since today’s Tokyo open, while the Japanese Yen has been the weakest major currency. The USD/JPY currency pair is still technically within a long-term bullish trend and some trend traders will be sticking with it on the long side, as despite falling sharply yesterday, it still has not retraced by an overly large amount since making a new 1-year high price earlier this week.
3. Stock markets look bullish, and the best day trades today are likely to be on the long side of certain major stock indices, with the NASDAQ 100 Index looking especially interesting.
4. Commodities are mostly gaining, with Cocoa futures standing out after hitting a new multi-year high yesterday before closing lower.
5. Australian Wage Price Index data came in as expected.
6. Chinese Industrial Production data came in slightly higher than expected.
7. There will be a release of UK CPI (inflation) data today which is expected to show a very strong decline in inflation, from an annualized rate of 6.7% to 4.7%.
8. There will be 3 high-impact US data releases today:
   PPI
   Retail Sales
   Empire State Manufacturing Index
9. There will be a release later of Australian Unemployment Rate data.