{"id":701504,"date":"2024-07-12T14:53:31","date_gmt":"2024-07-12T04:53:31","guid":{"rendered":"https:\/\/www.gomarkets.com\/?p=701504"},"modified":"2024-07-23T13:55:04","modified_gmt":"2024-07-23T03:55:04","slug":"us-trading-thematics-part-2-data-confirming","status":"publish","type":"post","link":"https:\/\/www.gomarkets.com\/en\/articles\/central-banks\/us-trading-thematics-part-2-data-confirming\/","title":{"rendered":"US trading thematics Part 2: Data Confirming"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Will June be the turning point? The market thinks it is \u2013 and its reaction to the CPI data not only signalled how it will trade in the coming months. It also showed that traders are primed to rotate to even more bullish positions. Because from the market\u2019s perspective September is now more than live its near enough to a lock for the Fed to cut rates.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The Data:<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Core CPI (excluding food and fuel) saw an anaemic rise of just 0.065% month on month falling well short of the 0.2% consensus. Key component of the slowdown was in owners\u2019 equivalent rent (OER) to 0.28% month on month, with primary rents decreasing to 0.26%.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This is the first real piece of data that is shown shelter is finally bucking its upward trend and moving to the lower side. But it wasn&#8217;t the only good news in the data.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Core services prices, excluding rents and OER, dropped by 0.07% month on month. Its lowest level in over 12 months. Hotel prices declined by 2%, while airfares saw a significant 5% drop. Recreation services decreased by 0.1%, while personal services rose by 0.9% month on month, driven by a 4% spike in legal services.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Core goods prices dipped by 0.12% month on month, with used car prices down 1.5% and new car prices falling 0.2%. Apparel prices crept up 0.1%, but furniture prices fell 0.2%.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Overall the core CPI P data should give the Federal Reserve that bit more confidence that it&#8217;s returning to target and that its rate cut cycle can begin sooner than probably forecasted.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Moving to headline CPI for the first time in more than four years monthly inflation dropped down 0.1% month on month and eased to just 3% year on year a 12-month low which also happens to be the three year low.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">There&#8217;s a pretty good reasonable explanation for this we saw a 3.8% slide in petrol pricing which held inflation back and offset the 0.2% increase in food and shelter. So it&#8217;s not completely clear cut The Fed can cut rates in September.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">But we digress because the market is suggesting it will treasury yields tumbled off the back of this you only have to look at the three year and the 10 year to understand that right cuts not only are they coming but are coming in waves. It really dropped into further FX trading with the US dollar once again under real pressure.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The US dollar Is something that we are still wary of there is definite downside in certain pairs. AUDUSD, NZDUSD have pretty clear reasons to see the appreciation bullishness that has been transpiring. But we&#8217;re not as confident in EURUSD GBPUSD or even USDCAD.<\/span><\/p>\n<p><b>The other trading reactions of note<\/b><\/p>\n<p><span style=\"font-weight: 400;\">With the CPI slowdown being more pronounced than anticipated, especially in shelter prices, which saw a 0.27% increase in owners&#8217; equivalent rent, akin to pre-pandemic levels. It does also put first quarter CPI into the box of being a blip rather than the trend.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">We think one of the more interesting trading movements off the back of the June CPI was the rotation out of mega caps and into small caps.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">One of the reasons the S&amp;P 500 and the NASDAQ hoping so strong since October last year Has been on the premise the Fed would cut rates in 2024-2025. However realistically has been driven by the magnificent 7 particularly NVIDIA, Apple, Meta and Microsoft. So much so that it&#8217;s actually papered over issues in industrials another non tech exposed sectors that have move no idea the level that the tech sector has.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">There&#8217;s a big question that\u2019s been building what happens post the first rate cut? Its been driving the bullishness in equities but once it becomes actual what next? There&#8217;s been somewhat of an answer in the trading post the CPI data which showed the S&amp;P 500 and the NASDAQ declining well the Russell 2000 jumped. The suggestion here is the market is looking to move into even more bullish positions in equities but also to cash in on the anticipated first rate cut that has been developed since October 2023.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">We think that is a trade we need to be mindful of because what may appear to be good news with regards to the right cut cycle beginning is probably already priced in. Multiples in the US markets are high multiples in US tech stocks are incredibly high. Which reminds us of the old market adage buy the rumour sell the fact. And maybe just maybe the trading post the June CPI data gave us a massive insight into what could happen in either the September or November Fed meeting months.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">But returning to the data we can&#8217;t go past the other economic data that may have been missed that again muddy the calls for a September rate cut. The Labor Department reported that weekly jobless claims fell to 222,000 a further 17,000 decrease from the previous week. Its the lowest level since June 1. Continuing claims dropped to 1.85 million. This suggests that although last week&#8217;s nonfarm payrolls was much lower than expected the overall employment market is still firm. Employment has been cited by the likes of San Francisco president Mary Daly as a reason to cut sooner rather than later. However if employment was to remain solid it could actually say a reverse of the trading that we&#8217;ve seen from the CPI data. It&#8217;s why we remain vigilant and once again why we think the USD is a tricky denominator, and only have confidence in pairs that have clear central bank differentials as we explained last week.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">We now await the data of the next two months heading into September 18 to confirm all these views.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Will June be the turning point? The market thinks it is \u2013 and its reaction to the CPI data not only signalled how it will trade in the coming months. It also showed that traders are primed to rotate to even more bullish positions. Because from the market\u2019s perspective September is now more than live [&hellip;]<\/p>\n","protected":false},"author":94,"featured_media":701571,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[2805,4382],"tags":[],"class_list":["post-701504","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-central-banks","category-featured"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v24.5 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>US trading thematics Part 2: Data Confirming - Wixad<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.gomarkets.com\/en\/articles\/central-banks\/us-trading-thematics-part-2-data-confirming\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"US trading thematics Part 2: Data Confirming - Wixad\" \/>\n<meta property=\"og:description\" content=\"Will June be the turning point? The market thinks it is \u2013 and its reaction to the CPI data not only signalled how it will trade in the coming months. It also showed that traders are primed to rotate to even more bullish positions. 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The market thinks it is \u2013 and its reaction to the CPI data not only signalled how it will trade in the coming months. It also showed that traders are primed to rotate to even more bullish positions. Because from the market\u2019s perspective September is now more than live ","link":"https:\/\/www.gomarkets.com\/en\/articles\/geopolitical-events\/us-trading-thematics-part-3-more-than-the-trump-trade\/","type":"next","category":"featured"},"previous":{"id":701439,"slug":"us-trading-thematics-part-1-when-powell-talks","title":"US trading thematics: Part 1 \u201cWhen Powell talks\u201d","date":"2024-07-10 15:37:28","excerpt":"Will June be the turning point? The market thinks it is \u2013 and its reaction to the CPI data not only signalled how it will trade in the coming months. It also showed that traders are primed to rotate to even more bullish positions. Because from the market\u2019s perspective September is now more than live ","link":"https:\/\/www.gomarkets.com\/en\/articles\/central-banks\/us-trading-thematics-part-1-when-powell-talks\/","type":"previous","category":"central-banks"},"category":{"slug":"central-banks"},"_links":{"self":[{"href":"https:\/\/www.gomarkets.com\/en\/wp-json\/wp\/v2\/posts\/701504","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.gomarkets.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.gomarkets.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.gomarkets.com\/en\/wp-json\/wp\/v2\/users\/94"}],"replies":[{"embeddable":true,"href":"https:\/\/www.gomarkets.com\/en\/wp-json\/wp\/v2\/comments?post=701504"}],"version-history":[{"count":0,"href":"https:\/\/www.gomarkets.com\/en\/wp-json\/wp\/v2\/posts\/701504\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.gomarkets.com\/en\/wp-json\/wp\/v2\/media\/701571"}],"wp:attachment":[{"href":"https:\/\/www.gomarkets.com\/en\/wp-json\/wp\/v2\/media?parent=701504"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.gomarkets.com\/en\/wp-json\/wp\/v2\/categories?post=701504"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.gomarkets.com\/en\/wp-json\/wp\/v2\/tags?post=701504"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}