Last week, the entire global market and especially the US celebrated the decline in inflation, including YoY CPI and Core CPI, which was considered the first sign that inflation might have peaked finally.
There are still a lot of talks about seasonality and that the data is just one headline and that markets should not misjudge the headline and wait for a confirmation. This might be true. However, we should deal with it as it is, regardless of what next month’s data is. When they are released, we will deal with them too.
PPI Surprised Lower
On Monday, markets also celebrated once again another sign of inflation peak. The PPI data showed a notable decline on multiple measures, which gave the market another signal that inflation is on the right path going forward.
Will The Fed Pause?
From what we saw since the announcement of the inflation data until today, it shows clearly that the market is pricing in one of two scenarios. Either the Fed will ease the size of the next hike or pause. This means, no more 75bps rate hikes again. Until it’s proven otherwise, the direction of the Federal Reserve in December is now clear.
All Eyes on Retail Sales Ahead
The US retail sales data will be released on Wednesday, and estimates point to a strong outcome, Retail Sales are expected to rise by 1.0% in October vs. 0% in September, while Core Retail Sales might rise by 0.4% vs. 0.1% during the same period.
Weaker data would fuel the estimates for pause by the Federal Reserve in December, despite all the talks about how solid the labor market is. For the past few weeks, there were a lot of layoffs in multiple sectors, including tech and retail, so relying on lagging data would be a mistake. The question here now is, will the Fed do the same mistake twice? It’s highly possible.
On the flip side, stronger data might have some drag on the major indices, while the upside retracement in USDX might extend, but this is likely to be limited for the next few days.
Don’t Ignore Geopolitics
During Tuesday’s session, news broke out of Poland that two Russian rockets struck a village near the border with Ukraine, which has led to a notable slide in equities, while DXY and Gold managed to push higher. However, the bond market did not show that much of a concern, the US 10-Year Yield closed the day lower, posting the lowest close in almost six weeks, which means that the bond market is suggesting that the downside move on Tuesday is another temporary move.
Yet, the next few hours are crucial, as long as there is no retaliation or escalation from both sides, markets will be able to stabilize and digest.
Free Live Streaming Session
Over the past few weeks, we hosted multiple paid streams and we issued multiple short-term and swing trades. All swing trades are in profits and we closed the majority of the positions. This includes EURUSD’s long trade from 0.9850 following the Federal Reserve decision, in addition to SPX, AMD, and others.
Today we will be hosting a free live streaming session during the US session, we will be coving Retail Sales data, this stream will be open and free for everyone on YouTube. You can access the stream by following the link https://youtu.be/WFem2Aeq0Vs