💥US100 at new highs after CPI report

Today's CPI report from the US improved the mood among market bulls. The report was expected to show the core index slowing down again from 5.6% y/y to 5.5% y/y. The actual data confirmed these expectations, with the monthly and annual core rate coming in line with analysts' expectations. However, the annual core rate was expected to remain unchanged at 5.0% y/y in April, but instead fell to 4.9% y/y. 

Detailed data: 

CPI reading for April: 4.9% y/y (expected: 5.0% y/y; previous: 5.0% y/y)

Core CPI reading: 5.5% y/y (expected: 5.5% y/y; previous: 5.6% y/y)

Monthly CPI: 0.4% m/m (expected 0.4% m/m; previous: 0.1% m/m)

Monthly core CPI: 0.4% m/m (expected: 0.4% m/m; previous: 0.4% m/m)

The growth rate of inflation in the largest economy surprises lower, and May's reading may further strengthen market sentiment. This is mainly related to the high base related to fuel prices. 

As you can see, we had record high gasoline prices in May and June last year, which gives the potential for a sizable drop in inflation in the next two months. Source: Bloomberg

It is in the wake of the decline in the outlook for continued inflationary pressure that is bolstering market sentiment. Investors are also encouraged by the low inflation reading in services (excluding the housing index), which is up just 0.1% m/m.

Nonetheless, the real estate sector, which is a lagging indicator, was one of the biggest contributors to the month-on-month increase in the CPI in April. Signs of strength in the real estate market are increasing, which may raise some further problems in the Fed fight against inflation. Source: Bloomberg

After better inflation data from the US, the US100 index is breaking out above the resistance zone set by local peaks at 13,360 points. The US dollar comes under pressure and weakens against the euro by 0.11%. Source: xStation 5