U.S Inflation Cooling Buoys Markets  

Date: August 11th

This week all eyes were on the U.S Consumer Price Index report as traders are eager to find out the likelihood of a soft landing. Read our week ahead article today and find out Connor Woods opinion on the recent report.

Consumer Price Index Report

Yesterday the U.S released its highly anticipated Consumer Price Index report, which showed inflation slowing to 8.5% in July, down from 9.1%. The core number was up 0.3%, but this was lower than the expected 0.5%. This was mainly due to used cars and transportation costs falling.

Looking at the NASDAQ100 5-minute chart above, you can see exactly what the markets thought about this report. This index, like others, grew over 2% in just 5 minutes of trading. This is understandable when you look at the report initially.

An Overreaction？

There is no doubt these figures are still too high. Comments from the Federal Reserve made it very clear that they were not claiming any sort of victory against inflation, and that the targets still remain way off. To add to the hawkish comments, it was indicated that inflation is now embedded and pressures remain broad-based. Essentially, the Federal Reserve is looking straight through this number.

All U.S indices are now making a move toward its 200-day moving average. If the Federal Reserve ramps up its hawkish message once more, then this makes another leg lower more attractive. This move could come from the market imbalance highlighted. If this fails, then the 200-day moving average is the next resistance target.

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