Markets are awaiting the release today of US Core PCE Price Index data which is influential upon the Fed as a leading inflation indicator.
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- There will be a release today in the USA of two key economic data points, the first one being much more important than the other for markets: the Core PCE Price Index, which is seen as a leading inflation indicator, and which also tends to be highly influential upon the decision-making at the Federal Reserve. The Index is expected to remain unchanged at a month-on-month increase of 0.3%. A lower number will likely be bearish for the US Dollar while a higher number will likely see the Dollar's relative value increase. The data will also likely affect US yields and stocks too.
- The US and Iran traded minor military blows last night for the second time this week since President Trump announced that a peace deal with Iran had been all but agreed last weekend. Four days later, rhetoric from the Iranian regime remains bellicose, and Trump is explicitly promising little in the near future except a gradual reopening of the Strait of Hormuz. My analysis: the Iranian regime would be prepared to sacrifice millions of its people and the destruction of entire major cities in order to ensure President Trump does not get a "good" deal. Unfortunately, it seems increasingly clear that President Trump and his prevailing advisors fail to understand this, and Trump has made the mistake of looking too eager for a deal - his verbal preparedness to not secure a deal is not fooling anyone. Anything of value the USA wants from Iran can only be secured by force. The market consensus is way off my estimation, so I suspect we will see drops in equities, and rises in crude oil and yields, when this penny finally drops. It is likely that Congress will try harder to exert control when this happens, and hawkish Republican Senators may start to publicly break with Trump's leadership on the matter.
- Equities have sold off mostly over the past day, but nothing dramatic has happened - markets are just reacting to worse news about the USA/Iran standoff. Optimism remains in the tech sector, especially in AI and chip stocks. Trend and momentum traders will still want to be long of the NASDAQ 100 Index, the KOSPI Composite, and the Nikkei 225 Index.
- The other major noteworthy asset affected by the Iran situation is Crude Oil, which has gained over the past day, potentially printing a bullish double bottom at $89.
- In the Forex market, since today's Tokyo open, the strongest major currency has been the Japanese Yen, while the weakest has been the Australian Dollar, reflecting the risk-off tilt due to the USA and Iran exchanging some fire. The US Dollar has also picked up a very minor bid.
- Crypto is looking more bearish, with Bitcoin breaking below its formerly supportive area above $75k and falling to a new 1.5-month low price.
- The other economic data release of high importance scheduled today is US Advance GDP, which is expected to show annualised growth over the past quarter of 2.0%.
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