Long-awaited inflation data from the U.S. significantly impacted the markets and the main actor, the USD, decreased to its counterparts. The data showed 5% inflation in a year-to-year comparison, which is 0.2% under the consensus. Lower than expected number wrote down month-to-month inflation, which rose 0.1%, lower than expected.
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On the other hand, core inflation as more valuable data for policymakers released the same numbers as expected. Year to year 5.6% and month to month 0.4% price rise. Core inflation, excluding food and energy prices, rose by 0.1% in a year-to-year comparison with the previous data release.
The problem with these data could be that numbers are not significantly bad or good for markets. Mixed signals have been sent to the Fed, where the situation among policymakers is divided as well. First of all, not a very significant rise in prices does not have pressure on the Fed to hike rates more than expected. Especially for a tight market, where every highly watched data sparks volatility in price moves. This could be seen as a positive message for investors, to feel a small release of fear with the possible lowering of interest rates at the end of this year.
On the other hand, inflation is not going down rapidly, so the question is: Is it enough? Is the actual pace of rate hikes enough to fight inflation? Some parts of markets and investors look at this situation more negatively.
Crude oil development
One of the winners is crude oil. Black gold is denominated in USD and after the inflation release, the commodity rose more than 2%. After the OPEC switch from a few days ago, when WTI and Brent elevated 8%, the price of crude went to the side. Today, the US inflation keeps the price in an up trend.
30 minutes chart of CL (Crude Oil Futures), source: Author’s analysis
Mixed signals everywhere
The current situation is foggy. Now we have mixed signals from CPI data. Mixed signals from analysts, and mixed signals from the market as well. Moreover, policymakers in Fed are divided into further monetary steps as well. This situation could lead to another volatility in the markets. USD is under considerable pressure, but the first reaction was negative.
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