US CPI on fleek

US CPI drops to 4.9% vs 5% expected

By Nadia Elbilassy | @Nadia Elbilassy | 10 May 2023

  • US CPI contradicts dim market sentiment from the NFP last week

  • Gold prices soar on the back of FOMC expectations

Inflation figures align with current monetary policy

Key inflation figures have dropped to 4.9% vs 5% expected and previous, which means inflation numbers are inline with the current monetary policy of aggressive hikes. The Question now is whether these figures are enough to make the case of ending this cycle or is the cycle going to continue to reach its target, regardless of its negative effects on the economy.

Positive NFP suggested a possible continuation of policy cycle

As the other equivalent of these important figures is the NFP from last week, already presenting a positive figure of 253K jobs vs expectations of 181K. which means that the aggressive cycle hasn’t affected the labor market to a point where the cycle needs to end as quickly as possible, and a further continuation is still possible.

FOMC expected to pause at upcoming meeting

At its most recent meeting, the FOMC indicated that it planned to hold off on further interest rate hikes unless there were significant changes in economic data that would justify a change in policy. As a result, the market consensus is that there is a high likelihood of the FOMC taking a break at its upcoming meeting, is above 84% and certainly to be adjusted higher after the CPI figure.

Gold prices soar and US dollar drops after CPI release

Gold prices soared after the CPI figure, to $2047, after seeing lows shortly after the NFP figures indicating an alternative for the Fed in their widely anticipated June meeting. While the US dollar dropped to 101.28 and US futures edged higher after 2 consecutive days of lows.