The US inflation has hit the highest level since 1982

In December, the US consumer price index increased by 0.5%, slightly above analysts' forecast of 0.4%. Annual consumer price growth in December was 7%, in line with expectations and the highest inflation rate since 1982.

However, a deeper look at the report revealed that in some areas of price pressure, especially in the services sector, price growth was less than expected, raising early hopes that inflation may be easing in the coming months. As a result, the dollar index fell sharply yesterday.

As the stock market closed, the S&P 500 Index (US500) increased by 0.28%, the Dow Jones Industrial Average (US30) added 0.11%, and the Nasdaq Technology Index (US 100) added 0.2%.

But investors should keep in mind that even if price pressure eases in three or six months, this will not lead to the Fed starting to make changes to its plans to cut stimulus and raise interest rates. Therefore, the decline in the dollar index is only a temporary factor.

Today, the US will release a report on the Producer Price Index, which shows the rate of inflation between factories and businesses. Analysts expect the index to show an increase of 0.4% in December. If the actual data is higher than that forecast, the dollar index may strengthen and vice versa. Also, investors should keep an eye on the weekly labor market report on initial jobless claims.

Democrats in the US Senate introduced a bill on sanctions against Russia. According to the new bill, the US would impose sweeping sanctions on top Russian military and government officials, including President Vladimir Putin, as well as key banking institutions, if Russia shows military aggression against Ukraine. There are also provisions in the law to consider all permissible measures about not starting up the Nord Stream 2 pipeline, which the White House believes is an instrument of malign influence by the Russian Federation.

European stock indices rose yesterday at the end of the day. The British FTSE 100 (UK100) gained 0.81%, the German DAX (DE30) gained 0.43%, the French CAC 40 (FR40) jumped 0.75%, the Spanish IBEX 35 (ES35) added 0.16%. Eurozone industrial production rose 2.3% in November 2021 after declining 1.3% a month earlier. Wholesale prices in Germany jumped 9.8% in 2021, a record growth rate since the 1973 energy crisis.

Oil prices reached two-month highs after a larger-than-expected decline in weekly crude inventories. A US Department of Energy report released on Wednesday showed a 4.55 million-barrel drop in commercial oil inventories last week, the lowest level since 2018. Analysts believe energy prices are likely to continue to rise as demand, driven by renewed economic activity and high inflation, faces colder weather and limited supply in the Northeast.

Asian stock indices are traded without a single dynamic. Japan's Nikkei 225 Index (JP225) decreased by almost 1% from the opening, Hong Kong's Hang Seng (HK50) lost 0.17%, but Australia's ASX 200 (AU200) increased by 0.48% in today's trading. The Chinese tech index is also down after its biggest jump in three months. Shares of Chinese developers are falling as debt-ridden real estate companies are facing a wave of key payments this week. Investors are also watching the coronavirus situation in the region. On Wednesday, Japan recorded more than 13,000 new infections for the first time in 4 months, while China was also seeing localized outbreaks ahead of the Beijing Winter Olympics.

Main market quotes:

S&P 500 (F) (US500) 4,726.35 +13.28 (+0.28%)

Dow Jones (US30) 36,290.32 +38.30 (+0.11%)

DAX (DE40) 16,010.32 +68.51 (+0.43%)

FTSE 100 (UK100) 7,551.72 +60.35 (+0.81%)

USD Index 94.98 -0.64 (-0.67%)

Important events for today:
  • - US Initial Jobless Claims (w/w) at 15:30 (GMT+2);
  • - US Producer Price Index (m/m) at 15:30 (GMT+2);
  • - US FOMC Member Brainard’s Speech at 17:00 (GMT+2);
  • - US Natural Gas Storage (w/w) at 17:30 (GMT+2).

by Justforex, 2022.01.13

We advise you to get acquainted with the daily forecasts for the major currency pairs.

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

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