Daily summary: Wall Street climbs ahead of key inflation report

• European indices finished today's session higher, with the benchmark DAX hovering near 11 month high of 15000 pts despite fresh hawkish comments from ECB members. Today Rehn said rates in the Eurozone will still have to rise significantly and reach restrictive levels.

• The Dow Jones is trading 0.405 higher, while the S&P 500 and the Nasdaq 100 rose 0.7% and 1.10% as expectations regarding lower than expected US CPI reading which will be released on Thursday boosted market sentiment. The overall economic picture has improved recently on the back of signs that inflation is cooling, allowing monetary policymakers to slow down the pace of tightening, while easing some worries about a deep economic downturn.

• The annual inflation rate in the US likely slowed for a sixth straight month to 6.5% in December from 7.1% in November, which would be a lowest level since October 2021. Lower energy prices most likely contributed the most to the slowdown, as gasoline costs declined nearly 12% from November to December. Meanwhile, the annual core rate is expected to fall to 5.7%, the lowest in a year.  

• Fed's Collins told NYT, that 25bp or 50 bp would be reasonable and at this stage she would lean towards 25 bp hike, but it’s very data-dependent.

• Currently, the market expects that the pace of rate hikes in the United States will slow down. The probability of a 25 basis point rate hike at the February meeting stands around 77%.

• The U.S. Energy Information Agency (EIA) reported that crude oil inventories rose by almost 19 million barrels in the first week of 2023. Currently, inventories stand at 439.6 million barrels, which is 1% above average. Initially price did not react to the data, however bulls took the initiative in the evening, and currently WTI and Brent are trading around 3.0% higher.

• Gold retreated slightly from 7-month highs and currently the price oscillates around $ 1873 mark amid a stronger dollar. Silver recorded slightly deeper pullback and fell to this month's lows around $23.30.

• Mixed moods prevails in the Forex market. The dollar did not make any moves against the euro or other major currencies besides Swiss Frank. It seems that traders restrain themselves from taking big transactions ahead of tomorrow's key data from the US. EURUSD trades close to 7-month highs.

• The AUDUSD pair jumped to 0.6930 after the Australian inflation rate in November increased to 7.3%, which may indicate more room for further interest rate hikes from RBA. Nevertheless most of the gains were erased later in the session.

• Despite overall upbeat sentiment, major cryptocurrencies are trading only marginally higher. Bitcoin rose 0.40%, but failed to stay above $17500 level, while Ethereum added 0.50% and hovers slightly below recent highs at $1345.

​​​​​​​AUDUSD managed to defend major support at 0.6880 and as long as the pair sits above it, another upward impulse towards key resistance at 0.7055 may be launched. Source: xStation5