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Market News [Market Morning] U.S. Inflation Hits a New High, the Fed is Expected to Raise Interest Rates, and the Dollar and Gold Soar Simultaneously

[Market Morning] U.S. Inflation Hits a New High, the Fed is Expected to Raise Interest Rates, and the Dollar and Gold Soar Simultaneously

On June 10, as U.S. inflation hit a 40-year high in May, traders raised their forecasts for the Fed to raise interest rates next. Gold fell intraday to $1,824.92, its lowest since May 19, following the release of the inflation data, but the safe-haven gold rebounded sharply above $50 as investors assessed the impact of the data on the economy. U.S. oil fell nearly 1% in late trading, and the market is still evaluating the impact of a larger-than-expected rise in U.S. CPI on future Fed policy and the U.S. economy.

TOPONE Markets Analyst
2022-06-13
648

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Spot gold stopped falling and rebounded last Friday and rose sharply during the US session, reaching a maximum of US$1,875/oz, and closed up 1.26% at US$1,870.96/oz; spot silver once approached the US$22 mark and closed up 0.97% at US$21.87 /ounce.


Comment: Gold prices rebounded in choppy trade on Friday as the focus turned to economic risks after rising US inflation data underpinned bets on aggressive interest rate hikes. US consumer prices accelerated in May, suggesting the Federal Reserve may continue to raise interest rates by 50 basis points until September. Gold fell to $1,824.92, its lowest since May 19, as investors Safe-haven gold quickly erased losses as it assessed the impact of the data on the economy, further boosted after US consumer confidence fell to an all-time low in early June, according to a University of Michigan survey.


Suggestion: go long spot gold at 1874.00 and target at 1900.80.


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The US dollar index rose sharply, standing at the 104 mark, and closed up 0.861% at 104.22; the 10-year US bond yield continued to rise from 3% to around 3.16%.


Comment: As US inflation hit a 40-year high in May and traders raised their forecasts for the Fed's next rate hike, US bond yields soared, and the dollar extended gains. The yen was largely flat on Friday after five straight days of losses, erasing intraday gains after rising as Japanese officials expressed concerns about the pace of the yen's depreciation.


Suggestion:  short the euro/dollar at 1.04860, and the target point is 1.03520.


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Crude oil turned from up to down, with WTI crude oil closing down 0.75% at $121.08 a barrel; Brent crude oil closed down 0.94% at $123.58 a barrel.


Comment: Crude oil prices rose for the seventh week in a row, although accelerated US inflation curbed crude oil gains, tight fuel supply, and demand kept market fundamentals bullish; West Texas Intermediate oil fell 0.7% on Friday, trading at $4 on the day Range-bound moves were volatile; WTI crude was up 1.5% for the week despite Friday's losses.


Suggestion:  long US crude oil at 115.840, with a target point of 119.240.


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In the stock market, the three major U.S. stock indexes maintained their downward trend throughout the day. The S&P 500 closed down 2.91% at 3900.86 points; the Dow closed down about 880 points, the Nasdaq fell 3.52%, and star technology stocks closed down collectively, Nvidia fell nearly 6%, Amazon fell by more than 5%, Tesla and Apple fell by more than 3%, and some popular Chinese concept stocks such as New Oriental, Bilibili, NetEase, and Pinduoduo bucked the market and closed higher.


Comment: US stocks fell for a third straight day on Friday and posted their biggest weekly loss since January, as inflation unexpectedly accelerated to a 40-year high in May, forcing traders to raise bets that the Federal Reserve will raise interest rates more aggressively. The S&P 500 fell 2.9% on Friday, its ninth weekly loss in the past ten weeks. Bank of America shares fell sharply on Friday after inflation data, with Wells Fargo leading losses. Riskier assets underperformed the broader market, with biotech stocks tumbling.


Suggestion: Go short at 11645.80 of the Nasdaq index and target at 10911.10.


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US CPI rose 8.6% year-on-year, and inflationary pressures strengthened Fed rate hike expectations.


According to data released by the US Department of Labor, the US CPI rose 1% month-on-month in May and 8.6% year-on-year, both higher than market expectations, with the year-on-year increase hitting a new high in more than 40 years. High inflation has strengthened the Fed's aggressive interest rate hike expectations. Traders price the Fed to raise interest rates by 50 basis points in June, July, and September, and the yields of US 5-year and 30-year Treasury bonds briefly inverted.


US University of Michigan consumer confidence index hits record low in June.


The US University of Michigan consumer confidence index came in at 50.2 in June, far below the expected 58 and a record low, matching the trough in the middle of the 1980 recession. Consumer inflation expectations have soared again, with inflation expectations for the year ahead soaring to 5.4%, the highest level in more than four years.


The White House may announce Biden's plan to visit Saudi Arabia. Biden said it would not be limited to energy issues.


US President Joe Biden said he "has not yet" decided whether to visit Saudi Arabia. Still, if he did, the meeting would not be limited to energy and was there to hold a "larger meeting" on regional security issues. According to two officials, the White House plans to officially announce Biden's plans for a trip to Saudi Arabia as early as Monday, and the schedule will include a meeting with the Saudi crown prince.

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