Markets in the Asian domain failed to trace the strength of the S&P500 on Tuesday. Asian equities have displayed a poor recovery despite investors shrugging off uncertainty ahead of the United States Consumer Price Index (CPI) data, which will release on Tuesday. The US Dollar Index (DXY) has surrendered the immediate support of 105.00 and is expected to remain on the tenterhooks ahead.
At the press time, Japan’s Nikkei225 gained 0.31%, ChinaA50 added 0.38% and Hang Seng jumped 0.93%.
S&P500 displayed a solid recovery on Monday as the street is expecting a further slowdown in the US inflation data. The odds for a decline in inflation have been cemented by a significant drop in US Producer Price Index (PPI) data. A sheer decline in prices of goods at the factory gate has trimmed consensus for inflationary pressures.
The headline inflation is expected to drop to 7.3% while the core CPI that excludes oil and food prices is seen lower at 6.1%. Analysts at JP Morgan Chase & Co. have cited that a soft reading in US CPI data could spark a powerful rally in US equities. The 500-stock basket of the United States could rally up to 10% if headline inflation drops to 6.9% or lower, as reported by Bloomberg.
Meanwhile, further ease in lockdown restrictions in China is expected to bring a recovery in Chinese equities ahead. The rollback of restrictions on the movement of men, materials, and machines has brought optimism to the second-largest economy. In a note from banking giant Morgan Stanley, chief China equity strategist Laura Wang wrote, “Multiple positive developments alongside a clear path set toward reopening warrant an upgrade and index target increases for China.
On the oil front, the supply crisis in the US led by a shutdown of the main pipeline that passes oil has triggered the risk of volatility in the demand-supply mechanism. The oil prices have managed to overstep the immediate resistance of $74.00 in the Asian session and are expected to deliver a solid rally ahead.
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GBP/USD trades in positive territory at around 1.2300 in the early European morning after the data from the UK showed that the ILO Unemployment Rate edged higher to 3.7% in October as expected. Investors await the November inflation report from the US.
EUR/USD is having a difficult time making a decisive move in either direction on Tuesday. The better-than-expected ZEW sentiment data for Germany and the Eurozone failed to trigger a noticeable market reaction with investors staying on the sidelines ahead of US CPI.
Gold price regains upside momentum after posting the biggest daily fall in a week. US Dollar retreat, mixed concerns surrounding CPI enables XAU/USD buyers to remain hopeful. Hawkish Fed bets, multiple hurdles to the north challenge Gold buyers ahead of US CPI.
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"King of forex indicators" is how the Nonfarm Payrolls report was called, but that belongs to the past. In 2022, rising inflation has meant that the Consumer Price Index (CPI) report has the most significant impact.
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