🚀US500 surges after US CPI data📈

USD weakens, equities rose as US inflation eases more than expected

The widely watched US CPI inflation for November has just been released and  showed a deceleration in price growth. The data came in below expectations as the headline inflation dropped to 7.1% YoY in November vs expected 7.3% YoY and compared to 7.7% in October.

Energy cost increased 13.1%, below 17.6% in October, due to gasoline (10.1% vs 17.5%), fuel oil (65.7% vs 68.5%) and electricity (13.7% vs 14.1%). A slowdown was also seen in food prices (10.6% vs 10.9%) while cost for used cars ad trucks declined 3.3% (after a 2% rise in October). On the other hand, prices for shelter (7.1% vs 6.9%) increased faster. Compared to the previous month, the CPI edged up 0.1% only, the least in three months, and also lower than forecasts of 0.3%. The strongest upward pressure continues to come from services while prices of goods are seen to soften due to improvements in supply chains. 

The Core CPI figure came in below the consensus estimate as well as it amounted to 6.0% YoY vs exp. 6.1% YoY and compared with 6.3%  YoY in previous month.

Inflation in the US eased more than expected in November. Source: Bloomberg

What is surprising is the fall in core inflation. In the case of headline reading, the energy contribution decreases: from 1.3% to 1.0%. The goods contribution is also weakening from 1.1% to 0.8%. The data may suggest that inflation may already reached its peak, which is in line with the recent change in rhetoric from the Fed. A slight increase in monthly inflation is also noteworthy.

Inflation in the US is receding, accompanied by a lower contribution from energy and commodity prices. Source: Bloomberg

FED is still widely expected to deliver a 50 basis point rate hike at the December policy meeting despite easing inflationary expectations, however decelerating price pressure may make policymakers rethink the need for aggressive tightening going forward.

US500 broke above long-term downward trendline following CPI release. Nearest resistance to watch lies at 4175 pts.Source: xStation5