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US CPI Up Next
All eyes will be on the latest US inflation due to be released shortly today. Expectations are primed for a fall in annualised headline inflation to 2.9% from 3.4%. In light of the current focus on whether the Fed is likely to ease rates in the coming months, today’s data will be crucial in deciding near-term market direction. If inflation is seen to have fallen back last month in line with expectations, USD will likely trade lower on the back of the data. If we undershoot forecasts, however, this will keep hopes of a near-term rate cut (sub 3 month) alive, pushing USD firmly lower and seeing risk assets climb higher.
Bearish Risks for Stocks
On the other hand, if inflation comes in above forecasts today, this will likely see the market heavily pushing back its rate cut projections. The has already said that near-term rate cut (March) is unlikely. Current market pricing is pegging June for a cut. However, if today’s data comes in well above forecasts, this will likely dilute that pricing sending USD higher and dragging risk assets lower. Given the run up we’ve seen in stock recently, a strong upside surprise today would likely fuel a sharp reaction lower as traders take profit on recent longs.
Technical Views
S&P 500
The rally in the S&P has stalled for now into a test of the bull channel highs. With bearish divergence in momentum studies, the market is vulnerable to a correction lower. 4840 is the key support level to watch and given the broader bull trend, the outlook remains bullish while above here. Below that level, 4627.50 and the bull channel lows will be next main support.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.