Market News
Can softer US CPI inflation give a much-needed spark to US index futures?
US CPI inflation softened again, bolstering expectations that the Federal Reserve is likely to pause further rate hikes. This has led to a risk-positive reaction in markets, with US index futures rebounding. However, questions remain whether this move can mark the end of recent corrections or sustain a renewed rally.
Can softer US CPI inflation give a much-needed spark to US index futures?
The past couple of weeks have seen US index futures dragged back in a corrective move. Despite a solid earnings season, traders remain focused on the Fed’s next steps. Today’s softer CPI inflation data is fueling expectations that the Fed will pause rate hikes, sparking gains in US index futures. But can this be the turning point?
Key Developments:
• US CPI Falls Again: Headline inflation rose to 3.2% YoY (from 3.0%), but core CPI edged down to 4.7% (from 4.8%). The consecutive monthly increases of +0.2% are consistent with the Fed’s 2% target trajectory, potentially signaling sustained disinflation.
• Fed Hikes Priced Out: Markets now see a 9.5% chance of a 25bps hike in September, with rate cuts on the table as early as March 2024. Up to -125bps of cuts are expected for 2024.
• Risk-Positive Reaction: Falling Treasury yields, a weaker USD, and rallies in metals have followed the CPI release. US index futures are rebounding, but critical resistance levels remain.
Can Index Futures Build on This Momentum?
The e-mini S&P 500 futures show a positive technical outlook. The correction appears to be part of a broader uptrend since March, with key support at 4411 holding firm. However, a break above resistance at 4554/4560 is needed to reignite bullish momentum.
The e-mini NASDAQ 100 futures are more vulnerable, having breached their March uptrend recently. The bulls must defend support at 15147 to avoid deeper corrections, while resistance between 15484 and 15610 remains a significant hurdle.
The sustainability of today’s recovery in index futures hinges on overcoming these resistance levels and broader risk sentiment in the coming days.
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