At 20:30 Beijing time, the annual rate of the U.S. unseasonably adjusted CPI in July recorded an annual rate of 8.5%, which is expected to be 8.70%, and the previous value was 9.10%. The annual rate of the core CPI in the United States without seasonal adjustment in July was 5.9%, which is expected to be 6.10%, and the previous value was 5.90%. The monthly rate of CPI in the United States after the seasonal adjustment in July was 0%, hitting a new low since May 2020.
After the data was released, the short-term increase of spot gold expanded to $20, and then fell back, falling below the 1800 mark; the intraday increase of spot silver once reached 1%. The most active gold futures contract on COMEX at 20:32 on August 10, Beijing time, instantly traded 2,225 lots in one minute, with a total value of USD 402 million.
The U.S. dollar index continued to fall and is now below 105, the lowest since July 4. Non-US currencies generally strengthened, the euro against the US dollar rose 60 points in the short-term, the pound against the US dollar rose 120 points in the short -term, the US dollar against the Canadian dollar fell 70 points in the short -term, and the US dollar against the yen fell 110 points in the short-term. NZD/USD rose as much as 1.50% on the day. The United States, cloth two short-term oil rose nearly 1 US dollars.
The U.S. 2/10-year Treasury yield curve inverted by more than 58 basis points at one point. U.S. federal funds futures rose after the CPI report, as traders trimmed bets on a U.S. rate hike. Swap market expectations for a rate hike by the Fed in September fell to 58 basis points.
The agency commented on the U.S. CPI data that U.S. inflation slowed significantly in July, giving U.S. monetary policymakers and consumers hope that inflation has peaked. The implied odds of a 75bps rate hike in September fell to 31% from 68% yesterday.
Understandably, the fall in the CPI has dampened aggressive bets in the bond market on the Fed’s policy path. The rate hike guidance at the Fed’s September meeting was skewed toward 50 basis points, not 75 basis points. It is also worth noting that the final rate target for 2023 has dropped from 3.7% to below 3.5%. Looking further, the market is still happy to see a rate cut of around 60 basis points in the second half of next year.
Analysts previously pointed out that energy prices (fuel prices) are expected to be the biggest driver of the overall improvement in the CPI in July, but rent and car prices continued to support core inflation at a high level in July. Owner Equivalent Rent (OER), a measure of core inflation, has hit record highs for the past two consecutive quarters.
Some institutions also pointed out that although (the US CPI slowdown) is cause for celebration, the 8.5% inflation rate is still well above the level the Fed wants to see. The option of raising rates by 50 or 75 basis points in September remains on the table.
Economists polled by Reuters also noted that headline inflation remains relatively high, with the Fed’s inflation target of 2 percent. And because of the aggressive pace of interest rate hikes by the Federal Reserve, the inversion of U.S. bond yields, a well-recognized and reliable recession indicator, has widened further.
Analysts pointed out that the annual rate of U.S. CPI eased in July due to a sharp drop in gasoline costs, bringing the first clear sign of relief for Americans who have witnessed rising inflation in the past two years. U.S. Labor Department data showed CPI was flat on the month in July, but underlying peer pressure remains high despite the fact that the Fed is still considering whether to continue raising interest rates sharply in September , which the Fed has said before slowing the implementation of its aggressive monetary policy. , need to see a decline in the CPI for several months .
St. Louis Fed President and 2022 FOMC voter Bullard said on Tuesday that it was too early to say that inflation had peaked. Brad said:
“I would like to see an improvement in a range of inflation measures rather than just one, and I would like to see clear and convincing evidence.”
“It’s going to be a lot harder to turn things around,” Bullard said of the core factors driving inflation. “We may see some relief in tomorrow’s headline CPI data, but we tend to track core PCE inflation. Precisely because we ignore energy prices that fluctuate up and down.”
The Fed is due to release another CPI data before its next meeting, with most major price trends unchanged given the better-than-expected headline CPI report. And with markets jittery, the Fed could end up with a massive repricing of rates, but it could also be easily reversed. The continued high volatility already seen in the U.S. Treasury market may be the only outcome the market can fully expect.