Focus Shifts to CPI Report Following Powell’s Commentary on Mixed PPI Data

Wall Street’s Positive Trend: Major U.S. indexes advanced reaching very near to their all-time highs. This upward movement was fuelled by reassurance from Federal Reserve Chair Jerome Powell, who hinted at the unlikelihood of imminent rate hikes.

Market Reaction to U.S. Producer Price Inflation: U.S. producer price data for April showed an unexpected increase, triggering an initial spike in the US dollar. Despite this, the market quickly reverted to pre-PPI levels as participants digested downward revisions to March data and observed easing price pressures in certain categories relevant to PCE.

Fed Chair Powell’s Commentary: Powell reiterated his stance from the post-FOMC meeting, suggesting that the Fed is more likely to maintain current interest rates rather than increase them. He labelled the recent PPI data as “mixed” rather than “hot,” emphasizing the importance of upcoming inflation reports, especially the consumer price index due later today.

Market Sentiment on Interest Rates: The financial markets are adjusting to the idea of higher-for-longer interest rates. Powell’s comments further reassured investors that an interest rate hike is not forthcoming, helping stocks to rally as Treasury yields declined.

Earnings and Market Rally: The first-quarter earnings season has generally exceeded expectations, contributing to the rally in major U.S. stock indexes, as they approach record levels.

U.S. CPI Data Anticipation: All eyes are on the upcoming U.S. CPI report, crucial for future Federal Reserve actions. Market consensus, influenced by recent data, anticipates a slight decrease in CPI growth for April, fostering hope for the Fed to commence its easing cycle by September.

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