The U.S.
market is slowly recovering from a rough blow after the shocking data was
released showing that October recorded 6.2% inflation in the United States. This
figures is far above the expected 5.8% consensus and is at the record high
since December 1990.
Extreme
inflation hypertension surprised markets. Even U.S. President Joe Biden, who
usually refrains from commenting on any macroeconomic data, as his predecessor Donald
Trump did, reacted by saying that taming inflation is a "priority"
for his administration. "Many people remain unsettled about the economy,
and we all know why," Mr. Biden said in his speech in Baltimore.
"They see higher prices. They go to the store online, or … go online and
they can't find what they always want and when they want it. And we're tracking
these issues and trying to figure out how to tackle them head on."
We may point out that Federal
Reserve’s (Fed) monetary policy is one of the major inflationary factors. But
is seems the U.S. President is quite aware of this. So we may hardly expect any
significant counter inflation moves before the next Fed meeting on December 15.
One step the Administration may take is to put forwards interventions when it
comes to the commodity market, which would require the unpacking of Federal oil
reserves.
Elevated inflation is posing
treats to the expected Christmas rally in the stock market. Investors may think
that the Fed’s $105 billion monthly injections of liquidity would soon be over,
but until then the feast of the rally continues.
The S&P 500 broad
market index has failed to test the 4720-4730 points margin, rolling back to
the nearest support at 4640 points. Still the index is trying to resume upward
movements from the new level.
It seems that the
first half of the next week will be uneasy for the American stock market. If
the S&P 500 index fails to return to 4720-4730 points today, we may see a
deeper decline of the index to 4600 points, where it would create excellent buy
opportunities with a new target above recent records.
The oil market is
squeezed by geopolitical economic and technical issues. Traders are waiting for
the U.S. Administration to make its move in response to OPEC+ decisions to
continue with the moderate 400,000 barrels per day increase of oil production.
After inflation figures showed a record high in October, the U.S Administration
is rumoured to intervene into the commodity market together with Japan. This
rumours, together with the strengthening of the Greenback, are pressuring crude
prices, but Brent crude prices are still at high levels at $82-83 per barrel. A
mid-term perspective for crude prices is seen neutral as Brent crude prices may
fluctuate within a wide trading range of $75-95 per barrel.
Gold prices have
soared above crucial resistance levels at $1840 per troy ounce just after the October
inflation figures were released, which marked a new record from the last high
in June at $1868 per ounce. A major question now is will this be sustained
above this crucial level at $1840 per ounce? Gold prices have a long way up to
reach the nearest resistance at $1920 per ounce, and if prices will not slide
below $1840 per ounce, gold may resume climbing. But this rally may end this
December.
The Forex market
situation has become much more complicated after the release of the inflation
data. The Euro was knocked out of the important support at 1.14400. However, a
single European currency still has chances to recover to 1.15000-1.15300 or
even to 1.16300 where it is expected to reverse.
GBPUSD fell to the
support level at 1.33800. The pair may rebound to 1.35500-1.36000 in the middle
of next week where it would hold above 1.34000 by next Tuesday. So, any dips at
1.33700-1.33800 could be interesting to open buy positions with an upside
target of 400-500 pips.