US Inflation in Focus Today
Today’s US inflation reading couldn’t have more meaning attached to it. We’ve seen a seismic shift in market sentiment on the back of the surprisingly strong US labour reports for January. With the NFP coming in almost 300% above forecasts alongside the unemployment rate dropping to its lowest levels since 1969, traders are grappling with the prospect of a resurgence in Fed hawkishness. The key takeaway from the report is that the US economy is holding up better than expected and therefore the Fed has more headroom to continue with rate hikes for longer or at higher levels.
Market Scenarios
Today’s inflation report will therefore be seen as either confirming this perspective or diluting it once again. If inflation is seen spiking higher last month, particularly if above forecasts, then hawkish pricing for the March FOMC is likely to increase, driving USD higher near-term while sending equities and commodities lower. Given that pricing for a larger .5% hike in March is currently only around 12%, an upside surprise today has the potential to drive a firm USD rally as pricing switches in favour of a larger hike. However, if CPI undershoots forecasts today this should help curtail USD bullishness ahead of the meeting, creating room for stocks and commodities to push higher.
Technical Views
Tesla
The rally in Tesla shares has stalled for now into a test of the 207.71 area. If today’s US inflation data undershoots forecasts, this should see fresh upside in the stock with a break of 207.71 opening the way for a test of 255.61 next. However, if USD rallies on the back of a hot inflation reading today, the stock is likely to retest support at 170.22. This will be a key pivot for Tesla with bulls needing to defend the level to keep the bullish outlook alive.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.