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Investors cautious ahead of US inflation

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By Craig Erlam  

Stock markets are treading water in the middle of the week, with traders having an eye on Thursday’s US inflation report.

It hasn’t been the most lively start to the year, but given how the last one ended, that was always a risk.

Investors ended 2023 full of optimism and it was going to be difficult to keep that going early in the new year, especially with policymakers relentlessly pushing back at the idea of so many rate cuts.

That is what makes Thursday’s CPI report all the more important, as the data now needs to fall in line with the bullish expectations priced into the markets.

The jobs report didn’t deliver on that front, even if it wasn’t bad either, but the wages component threw a spanner in the works.

The December inflation report could get things back on track, although the consensus view at this point of a 0.2% monthly CPI and 3.2% on an annual basis, would do little to inspire. The core reading is what matters most though and a sub-consensus reading here could brew some excitement in the markets once more.

Oil choppy

Oil prices remained choppy on Wednesday, but ultimately relatively unchanged from where they ended the year.

There remains plenty of unknowns in the oil market from OPEC+ unity to potential disruptions in the Red Sea and the growth prospects for the global economy.

For now, the price continues to trade not far from the lows we saw in December.

Gold drifts lower

Gold continues to edge lower, continuing to pare the gains from late last year as markets pull back on bullish expectations for interest rate cuts.

The CPI release from the US could prove to be a catalyst for gold should it alter expectations for the Fed ahead of its next meeting.

Is a bitcoin ETF priced in?

It’s been a volatile 24 hours for bitcoin following the false announcement from the SEC X account regarding ETF approvals.

What’s interesting is how modest the response was to the announcement in the markets which may indicate, as some have suggested, that an approval has largely been priced in.

With many believing an announcement is imminent, we may soon find out whether that is in fact the case.

Craig Erlam is Senior Market Analyst, UK & EMEA at OANDA

Opinions are the author’s, not necessarily that of OANDA Global Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. Losses can exceed investments.