US Indices Rise to Multi-Week Highs, Dollar Tumbles

US Equities

Major US indices rose to multi-week highs yesterday after a weak inflation report. The Core Consumer price index MoM rose by 0.1% in April versus expectations of 0.2%. The slowdown in the inflation numbers may relieve the pressures of the Federal Reserve to raise interest rates faster. The effect of the consumer price index on the Treasury yields was clear, US 10-year yields dropped from 3.00% to 2.95%, raising investors’ appetite for stocks. Apple is approaching a 1 trillion dollar value after gaining for the ninth consecutive day. Apple’s winning streak started with the positive earnings and was boosted by the 100 Billion dollar buyback plan.


The dollar index tumbled on Thursday on weaker-than-expected inflation numbers. The dollar retreated by almost one percent from its 2018 high. A soft reading in the core consumer price index might delay the tightening pace of the monetary policy of the Federal Reserve. In terms of data, Michigan Inflation expectation is due today.


The British pound fell to new four-month low against the US dollar as the Bank of England kept interest rates unchanged and cut the growth and inflation expectation. Seven out of nine Monetary Policy Committee members voted to keep interest rates unchanged. Bank of England Governor, Mark Carney, confirmed that the bank prefers to see good economic indications in Q2 before raising borrowing costs.


Gold prices climbed to a two-week high on expectations that the Federal Reserve might put interest rates hike on pause on a slower inflation. The demand for gold dropped in the first quarter of 2018, as investors preferred the rising yields. Weaker inflation numbers will affect negatively the bond yields and the dollar strength which will be supportive for gold.


Oil prices retreated from multi-year highs on the expectation that some major oil suppliers will raise their production to replace the lost Iranian supply. The US crude oil production reached a new record of 10.7 million barrels per day approaching the number one producer, Russia. In terms of data, U.S. Baker Hughes Oil Rig count is due.

The most important economic events:

GMT Country Event Expectation Previous
12:30 US FOMC Member Bullard Speaks    
12:30 US Import Price Index (MoM) (Apr)  0.5% 0.0%
12:30 US Export Price Index (MoM) (Apr)  0.3%  0.3% 
12:30 CA Employment Change (Apr) 17.4 32.3
12:30 CA Unemployment Rate (Apr)  5.8% 5.8% 
13:15 EU ECB President Draghi Speaks     
14:00 US Michigan Consumer Expectations (May)  88.0 88.4
14:00 US Michigan Consumer Sentiment (May) 98.5 98.8
17:00 US U.S. Baker Hughes Oil Rig Count   834


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