Inflation proved to be still running hot, and it’s not going away anytime soon. The latest CPI report showed headline inflation ticking up to 3.0% and core inflation hitting 3.3%, thanks to rising rents, food prices (up 0.4%), and infamously, egg prices that have seen a price tag 53% higher over the past year. On top of that, producer prices also came in higher than expected, with the PPI rising 0.4% last month; businesses are feeling the pinch. This all but kills hopes for an early Fed rate cut to compound with Fed Chair Jerome Powell, who made it clear they’re in no rush to lower rates if inflation stays above their 2% target. Markets now think the earliest we’ll see a cut is September, not considering the ongoing tariffs plan that could spike inflation figures, making the Fed’s job even more complex.
EQUITY
Stock closed higher, mainly from megacaps like Nvidia, Apple, and Tesla, a macro reaction to President Trump's plan for reciprocal tariffs on U.S. trading partners. Investor sentiment was boosted by positive corporate earnings, including MGM Resorts' strong quarterly results, although some companies like Trade Desk fell on weak forecasts. Tesla's decline was limited after a rumour of $400 billion government contract, which was later debunked. Intuit Inc., owner of TurboTax, was surprisingly unaffected even after news of DOGE entering the IRS for audit.
GOLD
Gold prices continue to creep higher after a minor mid-week retracement, considering the ongoing global trade war leading to safe-haven demand. Strong US inflation data suggest a longer rate pause that is detrimental to the dollar and prosperous to commodities. Analysts warn that a potential de-escalation in global conflicts could reverse gold's demand, but such scenarios appear unlikely in the near term.
OIL
Oil prices could be ending a three-week losing streak supported by higher global oil demand reaching 103.4 million barrels per day, mainly due to heating fuel use and high European gas prices shifting preference to oil. However, future increases in Russian oil supplies in light of Ukraine-Russia peace talks could limit gains, as it could ease sanctions on Moscow and boost global energy availability.
CURRENCY
The dollar weakened to a two-week low as January's producer price data suggested lower core PCE inflation, while President Trump’s promise of reciprocal tariffs failed to boost the currency. The euro rallied on the Russia-Ukraine peace talk, while the yen gained on hawkish comments from Japanese officials. Sterling also rose following Britain's preliminary economic growth data albeit slightly.
