💥PPI inflation data causes uncertainty among investors
Fresh US PPI inflation data weighed on market sentiment and now investors' attention shifts toward FOMC Minutes which will be released at 7:00 pm BST. The PPI reading was mixed and basically triggers a lot of uncertainty ahead of tomorrow's CPI report. Risk assets took a small hit after the PPI data, which added even more jitters ahead of today's Minutes. It is worth recalling that the Fed raised the federal funds rate by 75 bps to the 3%-3.25% range during its September meeting, the third straight three-quarter point increase and pushing borrowing costs to the highest since 2008 and today investors will be looking for hints whether one can expect another similar move in November.
It is worth remembering that at the time of the decision, the central bank did not know the latest positive data from the labor market, so now it has even more reasons to continue its hawkish policy. Therefore market attention is likely to focus more strongly on the CPI inflation data on Thursday and retail sales on Friday, as both readings should provide an update on the current state of the US economy. Nevertheless, considering the September FOMC meeting produced a new Summary of Economic Projections (SEP) that saw a boosted terminal Fed funds rate expectation for 2023, investors will scrutinize the details for guidance on when the rate hike cycle may end, which could lead to elevated volatility.
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Despite overall negative sentiment US500 bounced back from its lowest level in more than two years and is currently trading above major support at 3600 pts. If buyers manage to keep index above this level, another upward move towards local resistance at 3800 pts may be launched. This level coincides with 38.2% Fibonacci retracement of the upward wave launched in March 2020. However, any hawkish remarks in FOMC minutes may push the index lower, towards support at 3500 pts which is marked with a lower limit of the 1:1 structure. Source: xStation5
