Daily Summary: Wall Street buoyed by lower CPI data

The US CPI rose by 0.2% in June 2023, following a 0.1% increase in May over the past 12 months, the overall index increased by 3.0%, which was mainly driven by increases in the shelter and motor vehicle insurance categories.

CPI core inflation drops to 4.8%, also stronger than expected, which triggers market euphoria and fuels speculation that the Fed may only raise rates one more time.

Lower inflation than expected triggers significant market movements, with EURUSD exceeding 1.11 and marking its highest levels since April 2022.

Barkin says US inflation is still too high despite a slowdown in June and warns that if the Fed backs off too soon, inflation could return stronger

On the other hand, Kashkari says that only "persistent" inflation could trigger further action from the Fed

US100 recorded its highest levels since January 2022, gaining 1.6% at one point. Later, the gains were partially reduced.

Bank of Canada (BoC) has raised its target for the overnight rate to 4.75%, in line with its ongoing policy of quantitative tightening. The bank's decision is in line with forecasts, which anticipated a 25 basis points rate hike.

According to BoC: Canada's economy has shown unexpected strength, with robust consumption growth and signs of excess demand, particularly in the housing market. 

Gold gained 1.3% and silver over 4% in response to a sharp drop in 10-year yield to 3.85%.

USDJPY falls below the 140 level, which is also linked to the recent significant wage increase - for May the dynamics was 2.5%, which was the second highest reading in 5 years.

As expected, RBNZ kept interest rates unchanged - NZD was slightly weakening.

On the other hand, the BoC raised rates by 25 bp, as expected, but raised inflation projections, and the target is to be achieved only in mid-2025 (previously at the end of 2024).

Oil prices rose significantly today and accelerated after the publication of inflation. Brent oil exceeded $80, and WTI approached $76, even despite a significant increase in oil reserves to about 5 million barrels (this did not significantly increase comparative reserves).

Cryptocurrencies are recording slight increases today, with ETH showing higher gains than BTC.