The June CPI report in the U.S. showed a softer-than-expected reading, with gasoline prices driving much of the decline. However, ongoing tensions between Iran and potential oil price hikes may soon o
Yesterday's US inflation data revealed that the Consumer Price Index (CPI) for June came in at 3.5%, below the expected 3.8%. This drop was primarily attributed to a significant decline in gasoline prices, marking the largest monthly decrease since May 2020.
While this news provided some relief for markets, it's important to note that oil prices have already risen by about 14% following renewed US-Iran tensions. The refining market remains tight, suggesting that any deflationary trend in gasoline might not persist if energy prices remain elevated.
The core inflation rate also cooled slightly but showed no major boost from the World Cup or tariff spillovers. However, sustained higher energy costs could eventually translate into broader price pressures down the road, which traders should keep an eye on.
Markets reacted positively to this data with US stocks bouncing back overnight and tech shares rebounding. S&P 500 futures are up by 0.2%, while Nasdaq futures have gained more robustly at 0.7%. However, rising Treasury yields could soon reverse risk sentiment, as the 10-year yield is climbing to near 4.60%.
The dollar weakened slightly following this data but remains largely stable with USD/JPY above 162.00 and EUR/USD settling within a two-week trading range around 1.1420-40. Swissquote predicts that coming July, CPI figures are likely to strengthen again due to ongoing geopolitical tensions.
For now, the US inflation data offers some respite for traders but should be seen as temporary relief. Continued monitoring of oil prices and their impact on other segments of the economy is crucial given the current market dynamics.
Source: InvestingLive. Summarized and rewritten by the Vexoda Newsroom. This is market news, not financial advice.