Softer-than-expected US CPI print, released earlier today, triggered a volatility jump on USD and equity markets. However, there is one more potential volatility event on the agenda today - FOMC minutes, scheduled for release at 7:00 pm BST. The latest FOMC meeting saw a 25 basis point rate hike but wording of the statement was changed amid banking sector troubles. Economic projections from the March meeting showed Fed members still expecting rates to reach 5.1% by the end of this year. Forecast for end-2024 rate level was increased slightly to 4.3%. According to Powell, recent issues in the banking sector led to tightening of credit conditions, what may be seen as a kind of hike-equivalent.
US CPI data released today showed headline gauge decelerating from 6.0 to 5.0% YoY, more than 5.2% YoY expected. A drop in inflation was expected, mostly thanks to base effects, but as energy prices started to climb recently, inflation may still offer surprises in the coming months. Should energy commodity prices remain at current levels until year's end, inflation may see a jump - also because of base effects.
FOMC minutes release scheduled for today is unlikely to provide new drivers for the markets. Speeches from Fed members will likely have more impact on the markets until Fed meets and decides on rates in early-May. Currently, the market sees around-60% chance of the Fed delivering a 25 basis point rate hike on May 3, 2023.
US100 is testing 13,000 pts area after erasing post-CPI gains. Should the index break below this level, declines may deepen towards the next support zone in the 12,650-12,720 pts area. Source: xStation5
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