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Consumer prices rose 8.5% in July, less than expected as inflation eased.


US stocks surged on Wednesday, as the release of softer-than-expected inflation data bets the Federal Reserve could pivot to a smaller pace of hikes, while some market watchers take a grain of salt on the view and thought officials may still be a long way from their goal, 2% in the price increase.

The July Consumer Price Index (CPI) brought a sigh of relief to those with unstoppable inflation concerns, and swaps are now suggesting a move of 50 basis points as more likely in September than a repeat of the 75 bps increases that officials opted to implement at their past two meetings. In fact, the CPI surprise is just one piece of the intricate puzzle officials are playing with, as food prices in the US soared the most in July since 1979, keeping the cost of living painfully high even as lower gasoline costs offered some relief to consumers.

The benchmarks, S&P 500, Nasdaq 100, and Dow Jones Industrial Average surged on Wednesday as the critical US CPI indicated softer than expected results. All eleven sectors in S&P 500 stayed in positive territory and six out of eleven sectors rose more than 2% for the day, as Materials and Consumer Discretion performed the best among all groups, advancing with 2.88% and 2.87% respectively on Wednesday. The Dow Jones Industrial Average climbed 1.6%, Nasdaq 100 increased 2.8%, and the MSCI world index went up 1.8% on a daily basis for the day.

Main Pairs Movement

US dollar dropped on Wednesday, following a cooler-than-expected inflation report for July that raised expectations of a less hawkish interest rate hike cycle than previously anticipated by the Federal Reserve. The DXY index dropped to a level below 105.2 when critical data was released and fell deeper to a daily-low level below 104.7 during the middle of the US trading session. After the corrective pullback, the greenback oscillated in a range between 105.0 to 105.4.

The GBP/USD advanced with a 1.15% gain on a daily basis for the day. The cables attracted fresh transactions and reached a level above 1.225 as investors’ risk sentiment has improved dramatically following a significant decline in the US inflation rate. However, on the UK front, bulls are waiting for GDP due on Friday, and the economic data is likely to drop to 2.8% from the previous figure of 8.7%. Meanwhile, EUR/USD also surged to a monthly-high level above 1.036 amid a weak safe-haven greenback across the board. The pair rose with a 0.84% gain on a daily basis.

Gold slid on Wednesday, as the improvement in investors’ risk appetite. XAU/USD touched a refreshed monthly-high level to nearly US$1,808 mark while the announcement of US consumer data which the whole world focused on, then pullback and wavered in a range of US$1,788 to US$1,792 marks as a broader risk-on in the global market.

Economic Data

CurrencyDataTime (GMT + 8)Forecast
USDInitial Jobless Claims20:30263K
USDPPI (MoM) (Jul)20:300.2%