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Wall Street and European indexes continue their downward trend, driven by a sharp rise in the yields of US 10-year Treasuries, which today exceeded the 4.1% barrier (the highest since the first half of December 2023). US500 and US100 are down over 1.00%.
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The macroeconomic background, in investors' view, has changed, with money markets now pricing in only a 55% probability of the Fed deciding on the first interest rate cut during the Federal Reserve's March meeting. Just a week ago, this figure was around 67%.
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The dollar (USD) is again one of the strongest currencies alongside the British pound (GBP), while the Japanese yen continues to lose strength for the second day in a row. EURUSD is down 0.15% to 1.08600, and USDJPY is up 0.80% to 148.300.
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The UK's CPI inflation for December came in at 4.0% year-over-year, higher than the expected drop to 3.8% from 3.9%. Monthly, inflation rose by 0.4%, against an expectation of 0.2% and a previous decrease of -0.4%. Higher inflation implies a slower transition to potential interest rate cuts.
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US retail sales were very strong, supporting the dollar and increasing yields. Strong data mean lower chances of a rate cut in March. However, after yesterday's very weak NY Fed activity index, it's clear that data are mixed.
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The December retail sales report showed a 0.6% month-over-month increase (expected: 0.4%; previously: 0.3%). Core sales were 0.4% month-over-month (expected: 0.2%; previously: 0.2%).
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In Europe, grim macro data from China cast a shadow of uncertainty. Retail sales growth of 7.4% year-over-year in December, against the expected 8%, caused a slump in European fashion and luxury goods companies, heavily dependent on consumer conditions in China. Germany's DAX lost 0.84% today, and France's CAC40 over 1.07%.
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Gold extends its 2-day downward trend driven by a sharp rise in yields, currently losing close to 1.25%.
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Crude oil is trading directionless in today's session. At 22:30, API survey data on U.S. inventory changes will be released, also serving as an indicator before tomorrow's EIA data.
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In the cryptocurrency market, the downward trend continues. Selling pressure is linked to the realization of investors' overly high expectations related to demand for ETFs and selling pressure from investors wanting to sell their shares in an ETF managed by Grayscale.
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