Market Welcomes Inflation Surprise

This Tuesday’s session unfolded with the highly anticipated revelation of US inflation data, casting a spotlight on the nuanced developments of interest rates. With Jerome Powell recently casting shadows of doubt on the efficacy of the current interest rate in taming inflation to the coveted 2% mark, this data release held significant sway over the evolving sentiment. The outcome was nothing short of positive. Projections hinted at a dip in year-over-year inflation from 3.7% to 3.3%, yet the actual figure pleasantly surprised at a lower 3.2%. Core inflation, excluding the volatility of food and energy prices, mirrored this descent, clocking in at 4% and defying the market’s expectations for stagnation at the previous 4.1%.

The immediate aftermath witnessed a plunge in the US dollar as the market swiftly recalibrated its anticipations for the Federal Reserve’s upcoming meeting. Looking ahead, this dovish turn is poised to permeate the equity market, potentially bolstering interest rate-sensitive sectors such as technology. Notably, the Nasdaq 100 futures (CME: NQ) seized the opportunity, advancing confidently by over 1.5% in the wake of this data release.

Sources: US Bureau of Labor Statistics

Piece written by Tiaan van Aswegen, Trive Financial Market Analyst

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