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US Dollar falls after CPI data released


US stocks rebounded sharply on Thursday, regaining upside momentum and surged in a buy-everything relief rally as market participants rushed to price in a pivot in the US Federal Reserve monetary policy as soon as next December.

The US Bureau of Labor Statistics reported on Thursday that inflation in the US, as measured by the Consumer Price Index (CPI), declined to 7.7% on a yearly basis in October from 8% in September. The CPI data came in below the market forecast of 8% and spurred bets the Federal Reserve can downshift its aggressive rate-hike path. Therefore, risk-on flows came back to life and provided strong support to the equity markets. Markets are now pricing in an 80% probability of a 50 basis points rate hike in December following the upbeat US CPI report.

On the Eurozone front, the European Central Bank (ECB) policymakers remained hawkish amid rising recession fears, as they said on Thursday that there is no time for monetary policy to pause and the central bank needs to raise rates into restrictive territory.

The benchmarks, S&P 500 and Dow Jones Industrial Average both surged higher on Thursday as the S&P 500 performed its best first-day reaction to a CPI report since at least 2003 when records began. The S&P 500 was up 5.5% on a daily basis and the Dow Jones Industrial Average also advanced sharply with a 3.7% gain for the day. All eleven sectors in S&P 500 stayed in positive territory as the Information Technology sector and the Real Estate sector are the best performings among all groups, rising 8.33% and 7.74%, respectively. The Nasdaq 100 meanwhile surged the most with a 7.5% gain on Thursday and the MSCI World index was up 4.5% for the day.

Main Pairs Movement

The US dollar suffered heavy losses on Thursday, plummeted lower against all of its major rivals and extended its slide to the 108.00 area during the US trading session amid expectations for the US Federal Reserve to pivot. Optimism returned and the risk-on market mood exerted bearish pressure on the safe-haven greenback as the US Treasury yields shed over 20 bps. Increasing speculations that the Fed might slow the pace of rate hikes were further confirmed by investors’ reactions following the CPI data.

GBP/USD soared sharply on Thursday with a 3.15% gain after the cable touched a two-month high at around 1.1680 level following a cooler-than-expected US inflation report. On the UK front, the UK’s GDP for the third quarter is scheduled to release on Friday, which would shed some light on the status of the British economy. Meanwhile, EUR/USD staged a goodish rebound and surged above the 1.0200 mark amid a weaker US dollar across the board. The pair was up almost 2.00% for the day.

Gold rallied higher with a 2.85% gain for the day after shrugging off the soft tone and surged to a two-week high above the $1,755 mark during the late US session, as the broad-based US Dollar weakness acted as a tailwind for the precious metal. Meanwhile, WTI Oil edged higher with a 0.75% gain for the day amid mixed demand-supply concerns.

Economic Data

CurrencyDataTime (GMT + 8)Forecast
GBPGDP (QoQ) (Q3)15:00-0.5%
GBPGDP (MoM)15:00-0.4%
GBPGDP (YoY) (Q3)15:002.1%
GBPManufacturing Production (MoM) (Sep)15:00-0.4%
GBPMonthly GDP 3M/3M Change15:00 
EURGerman CPI (YoY) (Oct)15:0010.4%