S&P 500 crashes, USD surges after sticky CPI inflation rate

Data current as of 4/10/2024

Key points

• CPI inflation rate 0.1% higher than expected: (0:52)
• S&P 500 crashed more than 1% post-CPI: (2:14)
• Interest rates rise, Fed cuts delayed: (3:58)
• US dollar hits 30-year high vs the yen: (6:09)
• EUR/USD breaks below 1.0750: (7:29)

CPI inflation rate 0.1% higher than expected

In newly released March data, both core and headline Consumer Price Index (CPI) inflation rates came in at 3.8% and 3.5% respectively, slightly exceeding forecasts by 0.1%. This unexpected uptick in inflation could suggest mounting price pressures in the economy, influencing traders to reassess market conditions and potential central bank responses. The US continues to print robust economic data as the effects of 5.5% interest rates are yet to be seen.

S&P 500 crashed more than 1% post-CPI

Following the release of the CPI data, major stock indices experienced sharp declines, with the S&P 500 dropping approximately $100, the Nasdaq $300, and the Dow Jones $500. This market reaction reflects investors' concerns over higher inflation and its implications for interest rates and economic growth, impacting investment strategies across the board.

Interest rates rise, Fed cuts delayed

The 10-Year Treasury yields reached 4.5%, marking an uptick in line with a reduced likelihood of an FOMC interest rate cut in June from 60% to 20%. With an unlikely cut in June, doubt for the expected 3 rate cuts in 2024 grows. Rising yields signal shrinking investor appetite for bonds amid expectations of continued inflationary pressure, altering the landscape for forex and bond traders alike.

US dollar hits 30-year high vs the yen

USD/JPY soared as well, now edging close to 153.00 after surpassing the 152.00 mark for the first time since 1990. This remarkable price action underscores the US dollar's enduring strength and the wide interest rate differential between the US and Japan.

EUR/USD breaks below 1.0750

The euro, pound, and Australian dollar experienced notable dips against the US dollar, all falling more than 100 pips. This shift highlights the USD's strength in the forex market, influenced by global inflation trends and central bank policies, and guides traders in adjusting their forex trading strategies in anticipation of further currency movements.

How to trade US dollar

1. Open an account to get started, or practice on a demo account
2. Choose your forex trading platform
3. Open, monitor, and close positions on USD pairs

Trading forex requires an account with a forex broker like IG. Many traders watch major forex pairs like GBP/USD and USD/JPY for potential opportunities based on economic events such as inflation releases or interest rate decisions. Economic events can produce more volatility for forex pairs, which can mean greater potential profits and losses as risks can increase at these times.

You can help develop your forex trading strategies using resources like IG’s YouTube channel. Our curated playlists can help you stay up to date on current markets and understanding key terms. Once your strategy is developed, you can follow the above steps to opening an account and getting started trading forex.

Your profit or loss is calculated according to your full position size. Leverage will magnify both your profits and losses. It’s important to manage your risks carefully as losses can exceed your deposit. Ensure you understand the risks and benefits associated with trading leveraged products before you start trading with them. Trade using money you’re comfortable losing.