The U.S. market is slowly recovering from a rough blow after the shocking data was released showing that October recorded 6.2% inflation in the United States. This figures is far above the expected 5.8% consensus and is at the record high since December 1990.
Extreme inflation hypertension surprised markets. Even U.S. President Joe Biden, who usually refrains from commenting on any macroeconomic data, as his predecessor Donald Trump did, reacted by saying that taming inflation is a "priority" for his administration. "Many people remain unsettled about the economy, and we all know why," Mr. Biden said in his speech in Baltimore. "They see higher prices. They go to the store online, or … go online and they can't find what they always want and when they want it. And we're tracking these issues and trying to figure out how to tackle them head on."
We may point out that Federal Reserve’s (Fed) monetary policy is one of the major inflationary factors. But is seems the U.S. President is quite aware of this. So we may hardly expect any significant counter inflation moves before the next Fed meeting on December 15. One step the Administration may take is to put forwards interventions when it comes to the commodity market, which would require the unpacking of Federal oil reserves.
Elevated inflation is posing treats to the expected Christmas rally in the stock market. Investors may think that the Fed’s $105 billion monthly injections of liquidity would soon be over, but until then the feast of the rally continues.
The S&P 500 broad market index has failed to test the 4720-4730 points margin, rolling back to the nearest support at 4640 points. Still the index is trying to resume upward movements from the new level.
It seems that the first half of the next week will be uneasy for the American stock market. If the S&P 500 index fails to return to 4720-4730 points today, we may see a deeper decline of the index to 4600 points, where it would create excellent buy opportunities with a new target above recent records.
The oil market is squeezed by geopolitical economic and technical issues. Traders are waiting for the U.S. Administration to make its move in response to OPEC+ decisions to continue with the moderate 400,000 barrels per day increase of oil production. After inflation figures showed a record high in October, the U.S Administration is rumoured to intervene into the commodity market together with Japan. This rumours, together with the strengthening of the Greenback, are pressuring crude prices, but Brent crude prices are still at high levels at $82-83 per barrel. A mid-term perspective for crude prices is seen neutral as Brent crude prices may fluctuate within a wide trading range of $75-95 per barrel.
Gold prices have soared above crucial resistance levels at $1840 per troy ounce just after the October inflation figures were released, which marked a new record from the last high in June at $1868 per ounce. A major question now is will this be sustained above this crucial level at $1840 per ounce? Gold prices have a long way up to reach the nearest resistance at $1920 per ounce, and if prices will not slide below $1840 per ounce, gold may resume climbing. But this rally may end this December.
The Forex market situation has become much more complicated after the release of the inflation data. The Euro was knocked out of the important support at 1.14400. However, a single European currency still has chances to recover to 1.15000-1.15300 or even to 1.16300 where it is expected to reverse.
GBPUSD fell to the support level at 1.33800. The pair may rebound to 1.35500-1.36000 in the middle of next week where it would hold above 1.34000 by next Tuesday. So, any dips at 1.33700-1.33800 could be interesting to open buy positions with an upside target of 400-500 pips.