US CPI released higher at 8.2%

　　

U.S. equities experienced a volatile trading session with the release of U.S. CPI data. The Dow Jones Industrial Average rose 2.83% to close at 30038.72. The S&P 500 gained 2.6% to close at 3669.91. The tech-heavy Nasdaq Composite climbed 2.23% to close at 10649.15. U.S. equities futures continued to rise after the bell as U.S. treasury yields retreated below their intraday high of above 4%.

U.S. CPI data came in above expectations at 8.2%, year over year; however, core inflation, which strips out food and energy costs, jumped to its highest level since 1982—suggesting a broad-based rise in prices. The risk-off sentiment during the early American trading session quickly reversed as market participants bought in after the initial steep drop.

Looking ahead, as the third-quarter earnings season approaches, market participants should brace themselves and expect lowered earnings and lowered forward guidance. However, the hit to earnings could be mild as the Fed’s tightening has yet to be fully reflected on income statements. The financial sector will kick off the Q3 earnings season with JP Morgan Chase, Wells Fargo, Morgan Stanley, and Citigroup set to release their earnings before today’s American trading session. September’s retail sales will be released at 8:30 (EST).

Main Pairs Movement

The Dollar Index lost 0.71% over the course of yesterday’s trading. The Dollar experienced a turbulent trading session with the U.S. CPI data release and the subsequent equity market rally. The weakened Dollar came after the Dollar index broke above 113. Respite for Dollar bears came after market participants decided to “buy the dip”, despite inflation continuing to run hot.

EURUSD gained 0.76% over the course of yesterday’s trading. The Euro-Dollar pair reversed its downward trajectory, but the Euro is still plagued by slowing economic growth and soaring energy costs.

GBPUSD soared 1.98% over the course of yesterday’s trading. Reports of the British government reversing its course on the mini-budget policy have acted as a tailwind for the Pound’s rise.

Gold lost 0.42% over the course of yesterday’s trading, despite a broadly weaker Dollar. The Dollar denominated metal’s drop came as short-term U.S. treasury yields spike above 4%

Economic Data

Currency	Data	Time (GMT + 8)	Forecast
USD	Core Retail Sales (MoM) (Sep)	20:30	-0.1%
USD	Retail Sales (MoM) (Sep)	20:30	0.2%