US inflation seems to be improving

In December, US consumer prices rose less than expected, aiding a bond market selloff and renewing hopes the Federal Reserve may cut interest rates sooner.

The core consumer price index, excluding food and energy, increased 0.2%, down from 0.3% over the last four months, marking the first decline in six months. Factors like lower hotel prices, rising medical costs, and stable rent contributed to this figure.

After high inflation readings, this CPI easing suggests inflation progress may be underway, though Fed officials seek consistent results for confirmation. Ongoing price pressures have caused a decline in global bond markets and raised concerns the Fed may have eased policies too quickly last year.

Following last week’s strong jobs report, it is expected that rates will remain unchanged at the upcoming meeting. However, many economists now foresee a rate cut in March, shifting from previous expectations of no cuts until later in the year.

Big US bank profits surge

Wall Street’s excitement over Donald Trump’s growth agenda sees major banks ending the Biden years strongly. The four large lenders reporting Wednesday achieved their second-most profitable year ever in 2024, only behind Biden’s first year as president. Their trading and lending revenue benefited from interest rate changes, and investment banking fees rose 32% from a weak 2023, with executives forecasting more gains.

JPMorgan Chase became the first US bank to exceed $50 billion in annual profit, while Citigroup saw record revenue in three of its five main segments. The fourth quarter received a boost from Trump’s election win and policy hints causing market fluctuations, alongside stronger-than-expected jobs numbers resetting Federal Reserve rate cut expectations.

These factors allowed Goldman Sachs’s equities traders to achieve record revenue. JPMorgan’s stock and fixed-income desks also had their best fourth quarter ever. Additionally, corporate deal-making increased, with Wells Fargo raising its annual investment banking revenue by 62%. Bank of America and Morgan Stanley post results Thursday.

Eyes on US retail sales today

Retail sales are expected to have risen by 0.9% in December, compared to a 0.7% increase previously reported. When excluding autos and gas, sales are projected to have grown by 0.5%, an improvement from the prior 0.2%. The later Thanksgiving in 2024 likely contributes to a larger impact from seasonal-adjustment factors. Coupled with a weaker December CPI figure, this led us to lower our original estimate from 1.0%.

Sales excluding vehicles are predicted to rise by 0.5%, following a 0.2% increase in November. Meanwhile, sales at gasoline stations are anticipated to see a significant jump after a 0.1% rise in the previous month. According to the December consumer price report released on Wednesday, gasoline prices rose by 4.4%.

Sales that exclude both vehicle sales and gasoline are forecasted to grow by 0.4%, following a 0.2% gain in the prior month.

When excluding motor vehicles, building materials, gasoline station, and food services categories, the “control group” is anticipated to rise by 0.4%, matching the gain seen last month.

DXY testing 109.0 support

The US Dollar Index fell immediately after yesterday’s inflation data was released, as expectations for rate cuts renewed with the confirmation that inflation remains on target. Despite dropping to a low of 108.60 post-announcement, the index managed to close above 109.0 at the end of the trading day. Technical indicators suggest further declines are likely, although a drop below 109.0 is necessary to clear the path for potential declines toward 108.060, followed by 108.0 for the time being.

EURUSD rejected at 1.0350 resistance

The Euro rose to a peak of 1.0350 after the US inflation report but could not hold onto these gains, finishing yesterday’s trading below 1.03 at about 1.0280. Nevertheless, technical indicators are gradually improving, and a breakthrough above 1.0350 is required to confirm further upward movement. If this occurs, the next resistance level will be at 1.04, followed by 1.0450. Conversely, critical support remains at 1.0200.

AUDUSD’s downward trend may end soon

The Aussie rose for a third consecutive day, climbing to 0.6246, which has prompted technical indicators to shift away from oversold levels. Using the Time/Price method, it appears that AUDUSD might be nearing the conclusion of its downward trend, particularly if it closes above 0.6225 – 0.6250 this week. Should this happen, a new trend could emerge. The immediate resistance is at 0.6285, followed by 0.6300. This optimistic view depends on the pair maintaining a position above 0.6130 on the weekly chart.

Silver above $30

Silver continued its upward trajectory, overcoming earlier declines by recovering the $30 resistance area and peaking at $30.78 this morning, marking its highest point since mid-December. Additionally, technical indicators are showing improvement, implying the potential for further growth. The next resistance level is at $31.00; breaking above this would lead to possible gains towards $31.50.

Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

Disclaimer
This is a marketing communication and does not contain, and should not be construed as containing, investment advice or an investment recommendation or, an offer of or solicitation for any transactions in financial instruments. Past performance is not a guarantee of or prediction of future performance. The information contained herein does not constitute a personal recommendation and does not consider your personal investment objectives, investment strategies, financial situation or needs. Squared Financial makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on a recommendation, forecast, or other information supplied by Squared Financial.

The information on this site is not intended for any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.