Today, at 4:30 pm Amman time, the US inflation data will be released, and the markets are waiting for what the real reading will be like compared to what is
expected and compared to the previous reading. Expectations indicate that inflation on an annual basis will slow to 7.3% compared to 7.7% for the previous reading,
and if it is true Expectations this means that inflation continues to slow down for the fifth month in a row, and it is considered the lowest for this year, particularly
since last December.
It also indicates that the Fed's efforts to combat inflation through a tight monetary pace in which it raised interest rates 6 consecutive times this year reaching 4%,
has put an end to the continuing rise in inflation rates, and Federal Reserve members have confirmed their commitment to raising interest rates and keeping them at
suitable levels until inflation decline to the target levels at 2%, and the importance of this reading lies for two reasons:
First: It precedes the Fed meeting by one day, and that inflation and jobs data the Fed relies on in determining its monetary policy.
Second: The continued decline in inflation, as expected, will reconsider a lower increase in interest rates at the next Federal Reserve meeting in February 2023.
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Figure (1)
In general, it is expected that the issuance of these data will be accompanied by fluctuations in the financial markets, with a reminder that the initial market
reaction, regardless of the nature of the real reading, may be sharp and volatile at its beginning before the market begins to return to stability, so it must be
noted, and it is necessary to remember the golden rule Traders have different ideas and convictions in the way they interpret the information issued, and
therefore prices cannot move 100% according to that information, while the expected scenarios are as follows:
1- A reading higher than the previous reading (7.7%): means that inflation may start to rise again, and this will push the Fed to continue at a strict pace with regard to interest rates, and thus this may be positive for the US dollar and negative for stocks and gold.
2- A reading at or below expected (7.3% or less): Perhaps this will convince the Fed to adjust its strict policy and calm down the pace of raising interest rates, and thus this may be negative for the dollar and positive for stocks and gold.
3- A reading higher than expected, but lower than the previous reading (between 7.7% and 7.3%): here will be the most confusing situation for the markets and will make us expect fluctuations between raising and declining before prices take a specific direction.
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