Forex Market Analysis: April CPI to Impact Fed’s Rate Decisions
交易通知
CURRENCIES
Upcoming Release
The U.S. Bureau of Labor Statistics will release April’s consumer price index (CPI) data on Wednesday morning.
This crucial economic report is closely tracked by market participants for its significance to the Federal Reserve’s monetary policy path.
Context
Following Tuesday’s elevated producer price index (PPI) results, there’s a slight risk that inflation figures may also disappoint.
This could undermine confidence in the disinflationary trend observed in late 2023, which seems to have stalled this year.
Consensus Estimates
Headline CPI: Expected to rise 0.4% on a seasonally adjusted basis, reducing the annual rate slightly to 3.4% from 3.5%.
Core CPI: Expected to increase by 0.3%, lowering the 12-month reading to 3.6% from 3.8% in March.
Market Implications
Fed’s Stance: While the Fed has indicated it may wait longer to start dialing back policy restraint, it hasn’t fully committed to new hikes. An upside surprise in inflation data could lead to a more aggressive stance by the FOMC.
Hot Inflation Numbers: If the inflation data exceeds expectations, it could signal that the recent series of robust CPI readings are part of a new trend of reaccelerating costs, affecting the Fed’s policy decisions.
Impact on Rate Cut Bets: Higher-than-expected inflation could shift market bets away from a September rate cut, possibly delaying easing to December or beyond, and exerting upward pressure on yields and the US dollar, which would be bearish for gold prices.
Benign Inflation Report: If inflation data is below Wall Street’s projections, it could lead to lower yields and a weaker US dollar, creating a positive environment for precious metals and reviving hopes of a Fed pivot to a looser stance in early fall.
STOCK MARKET
Upcoming Release
On Wednesday, investors will review April’s Consumer Price Index (CPI) data, a key factor in the Federal Reserve’s upcoming interest rate decision.
The inflation report is set for release at 8:30 a.m. ET.
Consensus Estimates
Headline Inflation: Expected to be 3.4%, slightly down from March’s 3.5% annual gain.
Monthly Increase: Consumer prices are expected to have risen 0.4% month-over-month, matching March’s increase.
Contributing Factors
Energy Prices: Higher energy costs, driven by increased gas prices, are expected to contribute to a firmer headline CPI.
Gasoline Prices: Expected to stabilize in May as geopolitical risks ease, potentially limiting further increases.
Core Inflation
Annual Increase: Core CPI, excluding food and gas, is expected to have risen 3.6% over the past year, down from March’s 3.8%.
Monthly Increase: Core prices are expected to have increased by 0.3% in April, compared to 0.4% in March.
Stubborn Core Inflation
Elevated due to higher costs of shelter, insurance, and medical care.
March saw significant increases in motor vehicle insurance (2.6%) and maintenance (1.6%), following February’s increases of 0.9% and 0.4%, respectively.
Economist Expectations
Anticipate slower increases in motor vehicle insurance and maintenance prices in April.
Expect disinflation trends to improve in rents and healthcare, with weaker car insurance inflation and cooling labor markets contributing to this trend.
Predict a slight deceleration in healthcare costs, driven by lower health insurance prices.
Federal Reserve Considerations
Inflation remains above the Fed’s 2% target, with a bumpy path anticipated to reach this goal.
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