Today, at 4:30 pm Amman time, the US inflation data will be released and the markets are awaiting what the real reading will be compared to what is expected
and compared to the previous reading. Expectations indicate that inflation on an annual basis will continue to slow for the sixth month in a row to 6.5% compared to 7.1% in the previous reading, which is considered the lowest reading since November 2021.
But from the Fed's point of view, inflation is still far from the target levels of 2%, and the monetary tightening policy must continue as long as inflation rates
continue at unacceptable levels. On the other hand, the market's view shows optimism that this reading will prompt the Fed to slow down the pace of raising the
interest rate at their next meeting on February 1, 2023, to 25 basis points instead of raising it at greater rates than it has been for most of the past year.
What increases the optimism of the markets is that the recent jobs data rose by 223 thousand jobs, less than the previous reading, and wages slowed to 0.3%
less than expectations, and therefore the Fed's efforts are succeeding so far in combating inflation.
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 analyst expected scenarios are as follows:
- A reading higher than the previous reading (7.1%): means that there are fears of a rise in inflation again, and this will push the Fed to continue at a strict pace with regard to interest rates, and therefore this may be positive for the US dollar and negative for stocks and gold.
- A reading at or below expected (6.5%): 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.
- A reading higher than expected, but lower than the previous reading (between 7.1% and 6.5%): here will be the most confusing situation for the markets and will make us expect fluctuations between ups and downs before prices take a specific direction
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