Surprising CPI boosts dollar, dims gold shine

User The core index, watched closely by the Fed, remained unchanged on an annual basis at 3.9%, but increased by 0.4% on a monthly basis

By Farah Mourad | 13 February 2024

Market close

Stock market

During today's European session, there was a noticeable slowdown in the upward momentum, with major indices across the old continent experiencing this adjustment. Such movements are typical before the release of major data, as market participants tend to secure some profits.

As for today's CPI report, which aimed to shed light on inflationary trends, the numbers revealed a higher-than-expected slowdown in US inflation growth:

On an annual basis, inflation slowed to 3.1% in January, down from 3.4% in December (expectations at 2.9%), while the index saw a 0.3% rise on a monthly basis.

The core index, excluding food and energy, remained unchanged on an annual basis at 3.9%, but increased by 0.4% on a monthly basis.

Following the CPI report, US indices experienced a downturn, with the S&P 500 trading 50 points lower just minutes after the news.

In currency markets

EURUSD dipped significantly after the release of higher US CPI data. Meanwhile, the UK jobs data for December surprised on the hawkish side, with wage growth slowing less than anticipated, employment surpassing expectations, and the unemployment rate dropping to 3.8% –lowest level seen since April 2023. Consequently, GBP saw gains.

Conversely, weakness was observed in CHF following the release of Swiss CPI inflation data for January, which unexpectedly decelerated from 1.7% to 1.3% YoY, defying analysts' projections of a steady 1.7% YoY.

In the commodities market

Gold lost ground after the CPI report, trading near the major support of $2015 per ounce. It's crucial to monitor the price reaction around this level, as it has served as a major support level for the past few weeks, with next support at $2000 per ounce. Additionally, it's noteworthy that the trend of ETF funds witnessing continued outflows persists for precious metals.