Gold Price, Nasdaq 100, US Dollar Forecast:
- US inflation report for December will make headlines on Thursday
- While core CPI is seen easing on a year-on-year basis, the headline gauge is expected to pick up again, which could create a headache for the Fed.
- Gold prices, yields, the US dollar and the Nasdaq 100 consumer price index will be quite sensitive to the data.
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Most Read: US Dollar, Yields mixed ahead of US CPI, EUR/USD, GBP/USD, Nasdaq 100 setup
Wall Street will be on high alert on Thursday when the US Bureau of Labor Statistics releases its latest Consumer Price Index report, as the data could guide the Federal Reserve’s next steps in terms of monetary policy and, therefore, the timing of the first interest rate cut. Cutting.
December headline CPI saw a 0.2% rise, pushing the annual rate up from 3.1% to 3.2% – a blow to the Fed, which aims to get inflation back to 2.0% over the long term. For its part, the core gauge is projected to rise 0.3%, with the corresponding 12-month reading declining to 3.8% from 4.0% earlier.
US inflation trend
To gauge the potential market reaction, it is important to look at how the inflation data matches up with consensus estimates, keeping in mind two possible scenarios: an upside surprise in the data or a lower-than-expected number.
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Expectations for December inflation data
Source: DailyFX Economic Calendar
A hot CPI report that beats forecasts will likely prompt traders to place dovish bets on the Fed’s path, leading to a sharp rise in Treasury yields and the US dollar. This outcome would be bearish for gold as well as stocks, potentially dealing a windfall to the S&P 500 and Nasdaq 100.
Conversely, a benign report on consumer prices with lower-than-expected data, especially on key metrics, could validate aggressive bets on a rate cut in 2024, setting the stage for a slide in yields and a slowdown in the greenback. Can start again. This scenario would be bullish for gold and risk assets.
Markets are currently pricing in about 130 basis points of easing for this new year, but the US economy is in remarkably good shape and shows signs of stabilizing, with the FOMC reducing borrowing costs meaningfully. Would be reluctant to, especially if price stability remains elusive. This is why the December CPI report will take on extra importance this time.
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