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After nearly two years of falling bond prices as the Fed raised rates at fastest pace in history, it is now clear they are done raising, as disinflation is now appearing.
The financial markets are intently focused on the upcoming US CPI report, a key indicator that could influence Fed's next steps. Expectations are leaning towards a further slowdown in headline inflation to 3.3%, while the core inflation rate is projected to remain constant at 4.1%. However, there's a growing consensus among economists about the potential for upside risks in this data release, especially concerning goods and shelter inflation.
EU mid-market update: German ZEW survey paints the picture the worst is behind on the country in terms of economic performance; UK wage data mixed.
Investor sentiment is riding high in the wake of the latest US CPI report, with a notable surge in the DOW futures, climbing over 300 points, and a marked drop in 10-year yield, plunging from above 4.6% to below 4.5%. The report presented a picture of easing inflation, with both headline and core inflation rates falling short of market expectations. Significantly, core CPI has reached its lowest point in over two years. The weaker monthly price rise also bolsters the notion that disinflation is underway. This development could potentially revive Fed Chair Jerome Powell's "confidence&...
A meeting between US President Biden and China President Xi is the highlight; there is also US CPI and retail sales, the former being a key input into the Fed's policy deliberations; China activity data will also be released.