- Indexes drop at the opening of the cash session
- Dollar trades highers
- Bond yields rise
The market reacted mixed to the CPI release. The report showed a sharp decline in headline inflation to the lowest level before price increases. However, investors were hoping for a similar surprise for core inflation. But the core data turned out to be even slightly higher than expected. While the annual data met expectations, the monthly data were slightly higher. This increase is caused by a rebound in rental housing prices, which theoretically is not typically demand-driven. Therefore, the path to interest rate cuts next week is practically open. At the time of publication, a 25 basis point cut seems most likely.
Immediately after the publication, the dollar strengthened significantly, and bond yields rose dynamically. This means that the markets were hoping for slightly lower readings for core inflation, and thus expectations for a larger cut, i.e., 50 basis points, are now much lower. However, over time, the initial reaction was erased, and index contracts were even noted in the plus at one moment. The opening of the cash session in the US increased downward pressure, thereby pushing the main benchmarks lower. Currently, US500 is down 0.80% to 5450 points, US100 down 0.20% to 18800 points, and US2000 down 1.40% to 2070 points.
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The index records losses today after increased volatility during the CPI data publication. It now seems that the bears are taking control, and the ratings may find another support zone around 5440 points. The next level worth noting is around 5300–5330 points, which has been an effective technical level three times in the past.
Source: xStation 5
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