Volatility in global markets slowed on Thursday and moved into " big things are about to happen" mode:
US CPI Preview
The $USD Index(USDindex.FOREX)$ moved in an extremely narrow range and was only half as volatile as on Tuesday.
$NVIDIA Corp(NVDA)$ on Wall Street hit record highs, with the $DJIA(.DJI)$ up 0.45%, the $S&P 500(.SPX)$ up 0.57% and the $NASDAQ(.IXIC)$ up 0.75%.
$Gold - main 2402(GCmain)$ fell back, reaching 2020 levels at one point, but a weaker US dollar provided a bottom.
$WTI Crude Oil - main 2402(CLmain)$ prices fell 1% as US crude inventories unexpectedly rose, raising concerns about demand in the largest oil market. However, investors remained concerned about possible oil supply disruptions in the Middle East during the war between Israel and Hamas, which limited oil price losses.
US government bond yields were mixed on Wednesday, with yields on short-term bonds falling slightly.
Market Interpretation:
At the end of the global trading session on Wednesday, New York Fed President Williams delivered a more hawkish speech, but the market was unmoved, and the influence of Fed officials on the market seemed to be ineffective in the short term.
The market’s expectations for the Fed to cut interest rates have not changed much: the probability of a rate cut in March is 68%, and the rate of interest rate cuts in 2024 will be 140 basis points.
Williams said on Wednesday it was too early to call for a rate cut because the Fed was still some way off from getting inflation back to its 2% target.
The market's focus is now on the inflation data to be released in the United States at 8:30 EST:
1. Economists expect that the U.S. CPI will rebound year-on-year and month-on-month in December. This will be the first rebound in inflation since July last year, which is definitely a big deal for the market. The U.S. dollar and U.S. bonds will rebound, while U.S. stocks may fall.
2. The market has not yet speculated on the risk of a rebound in inflation in advance, which still needs to be noted. If the "dollar rises, everything falls" pattern does not appear before the release of U.S. CPI data, then even if the data is in line with expectations, it will be difficult to hype the theme of an inflation rebound.
3. Assuming that tonight’s data is either “for the better” (the core CPI continues to fall) or “for the worse” (the overall CPI rebounds), the focus will only be on the data that does not meet expectations. However, most investment banks on Wall Street believe that tonight's data is very likely to be in line with market expectations.
4. Currently, some traders are looking to increase bets against U.S. Treasuries.
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