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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

US CPI Preview: What to expect? What will the impact be on the market?

Expectations are to see the year-over-year figure drop to 8.2%, which can be viewed as a slight cool-down in price growth from April’s 8.3% yearly rise.

Source: Bloomberg

The US Consumer Price Index is expected to be released on June 10, 2022, at 8:30 A.M. Eastern Time (11:30 PM AEST). The expectation is for the year on year figure to drop to 8.2%, which can be viewed as a slight cool-down in price growth from April’s 8.3% yearly rise. The core component, once food and energy prices are removed will hopefully move down to 5.9% from 6.2% year on year.

Recent economic data wasn’t in the position to support an optimistic view for print as the pressure came after the value of food increased by a steep 10.8%, the largest percentage increase since November 1980.

Oil presented another high risk as prices climbed over 17% in three weeks and barrels were valued at $125 this week. The EU’s sanctions on Russian oil and the inventory data highlighted the supply crunch.

A hotter than expected print will undoubtedly urge the Fed to move quickly and hard as the central bank has already been blamed for 'moving behind the curve.'

The usual way to tame inflation is to raise interest rates which currently sits at 5-6% in the US, this in turn points to a federal fund rate of at least 6-7%, a level not seen since 2007. Even so, the central bank is still crossing its fingers and stressing that it could bring inflation back to the target band of around 2% though the history and the recent growth data suggest that the Fed’s next move if going to cross a fine line, causing the economy to sink.

Source: U.S. Bureau of Labor Statistics

Oil Price

Source: IG

S&P 500

Since early last week, Wall Street has been in a cautious mood with a relatively low trading volume and the S&P 500 is currently oscillating in the narrow band between 4077 to 4158.

In the event of a better than expected CPI print, traders are likely to see the price breach through the 50-day moving average and even the next resistance at 4194, the March low. On the other hand, slips may find imminent support from the 20-day MA. A fall through this level would most likely lead to a drawn-out decline, taking the S&P 500 down towards the May low bear market territory.

Source: IG

This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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