Market Report - 10/04/2024
Investors await US inflation data ; Euro remains stable ahead of ECB decision
The FTSE 100 has risen in this morning’s trading session as investors anticipate this afternoon’s inflation report from the US.
The FTSE is up 43 points or 0.5% at 7977 points. This takes it near to last week’s one-year high, not too far from the all-time high of 8,047 points (February last year).
Investors are now poised for the latest US inflation report which is due to be released this afternoon. The report follows March’s strong jobs report released on Friday, that far exceeded all forecasts. This raises questions on how soon and how much the Federal Reserve will cut rates this year.
The inflation data reading is expected to show a small pick-up in the pace of price rises, lifting US CPI levels to 3.4% from 3.2%. Core inflation however could continue to slow, potentially down to 3.7% from 3.8%.
There have already been some hawkish comments from Fed officials this week off the back of last Friday’s non-farm payroll report. Should the CPI data today show that inflation is remaining stubborn, then we could continue to see predominantly hawkish tones from the FOMC. There is also some investor thinking of a scaling back on the probability of a July rate cut, which in theory could bolster the dollar.
GBP/USD has currently got a relatively strong support level at 1.2618. However, should we see further safe-haven demand from the USD as a result of a stronger than expected CPI report, then this level could be tested and breached. This would potentially open the door for a fall-back into the 1.25’s.
The Federal Reserve (who aims to push inflation lower) will be likely be influenced by today’s data. Fed Chair Jerome Powell wants to see sustained evidence of inflation coming down before making any cuts to the rate. A solid CPI number will likely have markets pricing accordingly for a June cut, which could see the dollar rising sharply.
The Euro has remained stable throughout the week with the ECB expected to hold rates this week, although traders are betting that the central bank will start cutting rates in June. Investors and traders will be looking for signals from policymakers that give clues as to the pace and scope of any potential monetary policy decisions to come.
The Eurozone’s inflation has been trending down, with March’s estimated CPI cooling more than expected to 2.4%. Given that this figure remains above the ECB's target of 2%, it is likely that the ECB will leave its policy rates unchanged.