The latest inflation numbers came in as expected, with core consumer prices coming in cooler than expected in December at 0.2% monthly growth. The headline inflation figure did tick up to 0.4% for the month, mainly due to rising energy costs, but investors seemed more focused on the positive core reading that strips out volatile food and fuel prices. The overall yearly inflation rate landed at 2.9%, which marks a slight rebound from November's 2.7%, with some suggesting that 3% is the new normal. Market experts like Vital Knowledge called this the "third dovish inflation number in the last 24 hours," coming after similar encouraging data from producer prices and UK inflation. While some analysts caution that inflation remains "sticky," the general mood on Wall Street is optimistic that the economy can keep growing while price pressures gradually ease.
EQUITY
The inflation report on Wednesday rang a positive tone for fiscal policy, with the Nasdaq seeing better gains than its counterpart, being the more sensitive index to rate adjustment. Consumer discretionary led S&P sectors with strong growth, as robust earnings from major banks like Goldman Sachs, Wells Fargo, and Citigroup fuelled optimism. A ceasefire between Israel and Hamas further bolstered sentiment, while crude oil and Bitcoin also advanced significantly.
GOLD
Gold prices reached over one-month highs after U.S. core inflation rose less than expected in December. This was supported by falling U.S. Treasury yields and a weaker dollar, although a ceasefire between Israel and Hamas limited some of the safe-haven demand for gold. Other precious metals showed minor buying, with silver slightly down and platinum up.
OIL
Brent stayed above $82 per barrel, unaffected by the new ceasefire deal, as factors such as supply risks and a sustained decline in US crude inventories are more significant. Analysts from RBC Capital Markets caution that weak fundamentals, such as macroeconomic softness and potential oversupply, could pressure prices downward, forecasting an average Brent price of $65.42 for the year. Future risk stays limited after OPEC maintained its forecast for steady global demand growth in 2026.
CURRENCY
The US dollar held around 109 after declining for three sessions with inflation data strengthening the conviction for a Federal Reserve rate cuts in 2025. The Japanese yen reached a one-month high against the dollar as markets priced in a potential Bank of Japan rate hike next week, with analysts noting about a 78% chance of a 25 basis point increase. China's yuan traded near a 16-month low as investors awaited clarity on incoming President Trump's tariff plans while watching for potential reserve ratio cuts from China's central bank before the Spring Festival.
