US CPI dips for the first time in 3 years

With US CPI figures for June coming in surprisingly lower compared to the previous month, market trends took a complete turn during Thursday's session on Wall Street.
 

The CPI on a monthly variation fell by 0.1% compared to May, which had no variations.

Meanwhile, annual inflation stands at 3.0%, contrasting with market expectations of 3.1%, and three-tenths lower than the May measurement, which was set at 3.3%.

Stronger case for September rate cut

The release of the market's most anticipated data have fuelled market expectations (85.1% according to the FED rate barometer by Investing) for the first cut of 25 basis points in interest rates at the next FOMC meeting on 18 September.

Similarly, it is expected that there will be no changes in rates at the imminent committee meeting on 31 July.

In the previous sessions, on Tuesday 9 and Wednesday 10 July, Federal Reserve Chairman Jerome Powell made his semi-annual testimony before the US Senate Banking Committee, slightly foreshadowing the subsequently known CPI figures.

“The latest inflation readings have shown progress which, although modest, more good data would strengthen our confidence that inflation will move sustainably towards our initial 2% target,” Powell said.

Meanwhile, markets reacted with gold soaring to highs not seen since last 22 May, reaching US$2423 per ounce, and the dollar experiencing a deep retreat of 0.7%, dropping to 104,085 points.

In this context, Wall Street, and primarily the tech sector, experienced a bleak day, with Tesla and Nvidia (which recently surpassed the $1,000 mark) recording the most aggressive declines of 8.50% and 5.87%, respectively. Meta fell 4.11%. Amazon, Apple, and Microsoft also corrected downwards by 2.37%, 2.33%, and 2.50%, respectively.

Finally, the yields on the benchmark 10-year Treasury bond fell to 4.291%.

Everything indicates that the Fed will align with the tone of the major global central banks and begin the much-anticipated path towards rate cuts.

Disclaimer: The content of this article is intended for informational purposes only and should not be considered as professional advice.