Daily Market Update

While the month-over-month changes met projection expectations, the year-over-year change in both headline and core (excluding food and energy) indices was higher than expected and showed a marked increase from December’s data.

Housing prices showed stickiness as well, posting a 0.8% increase month-over-month. This has been a point of concern for Jerome Powell and the Federal Reserve – Powell has flagged housing as a segment of the economy with “disinflation” in the pipeline. This is not unexpected when taken in conjunction with the strong employment numbers seen earlier this month.

Though these numbers do show a monthly increase, these numbers are still lower than they were one year ago, easing some market worries about a hawkish tilt from the Fed. Overall the greenback had cooled slightly against most G10 currencies overnight, but the CPI release has clouded the picture from the Fed, and the dollar enters murky territory to start the day.

What to Watch Today…

• No major economic events are scheduled for today
• Monex USA Online is always open

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EUR ⇑

Euro prices whipsawed this morning after posting steady increases overnight amid the release of US CPI data showing price increases, but not enough for the Federal Reserve to change its current path.  Early this morning, the European Commission formally announced an improvement in its projections for GDP growth throughout the Eurozone, raising predictions for the year to 0.9% versus last November’s 0.3% figure.

French unemployment also declined 0.1%, adding to the single currency’s strength overnight before returning closer to yesterday’s close after United States inflation data. With the data calendar out of the Eurozone relatively light this weekend, the single currency will be susceptible to other releases around the world.

 

GBP ⇑

Pound Sterling spiked during Asian and European trading overnight, opening the US session up nearly half a percent against the buck. News of an unexpectedly strong labor market had traders raising bets for a higher terminal rate from the Bank of England.
 
While headline unemployment came in steady at 3.7%, earnings growth data posted a 6.7% year-over-year increase. This measure has been highlighted by the central bank as a key leading indicator for inflation and may force the BoE to take a longer tightening path to tackle resistant inflation through the UK. Tomorrow’s CPI data will likely confirm that inflation remains high and force the Bank of England to continue raising rates longer and faster than previously expected.