US Inflation Rises in December

• December reveals hotter inflation – base effects to be considered
• Immediate market reaction from USD, gold and S&P 500 futures

December Reveals Hotter Inflation - Base Effects to be Considered

December brought about hotter-than-expected headline and core inflation in the US. Headline revealed a 3.4% increase compared to the same period last year, surpassing the 3.2% expected and the prior 3.1% rise in November. Core inflation only just managed to break below the stubborn 4% mark (3.9%).

Given the underlying base effects it isn’t entirely a surprise to see inflation coming in higher but year on year case effects are likely to see both figures moving lower again from January onwards.

Immediate Market Reaction: S&P 500 Futures, US Dollar Basket, and Gold

The market reaction to the hotter-than-expected data was largely contained as it had been expected to some degree. S&P 500 E-mini futures dropped initially but has recovered to trade near flat ahead of the US market open.

The US dollar has held onto much of its initial move, rising 0.5% since the release. The dollar has recovered some of its losses from the backend of last year but has struggled to see further bullish momentum really take shape.

Gold moved higher but also recovered in the aftermath of the release to trade up on the day thus far. The precious metal still supported by aggressive rate cut expectations and easing bond yields. Safe haven appeal adds to the allure and the threat of rising real interest rates gets put on the backburner with inflation edging up.

Source: TradingView, prepared by Richard Snow

https://www.dailyfx.com/news/us-breaking-news-core-and-headline-cpi-rise-dxy-gold-reaction-20240111.html