Easing US inflation lifts stocks

Fed comforted by inflation data

Stock markets are making decent gains on Wednesday, buoyed by the latest inflation data from the US which eased in July.

While I don’t think a small decline is a game changer, as far as monetary policy is concerned, it may have been had we continued to see an acceleration, or evidence of more worrying price pressures. Instead, we can all breathe a little easier, albeit safe in the knowledge that tapering is still coming and it’s likely to be announced next month.

Easing price pressures, an economy that’s recovering strongly and a labour market that’s rapidly improving will be music to the ears of Fed policy makers. While it may not change the start date, or even pace, of tapering given their view that inflation was transitory, it will give them an additional degree of comfort and allow them to take their foot off the gas should it be required.

US yields softened in response to the CPI data, although we’re already seeing the 10-year recouping most of those losses since the opening bell on Wall Street. That may be a sign that traders agree it was no game changer, or that the initial move was over the top, but the important thing is that the pressure is off, for now.

The dollar also eased off in the aftermath of the release, although it hasn’t been so fortunate in reversing those losses at the time of writing. It’s been on a fantastic run the last week or so, with a combination of strong data and hawkish Fed speak driving the gains. It has been losing momentum going into the release though so may be seeing some profit taking.

Bitcoin setting sights on new highs

Bitcoin is pushing higher once more although it has yet to break through resistance around $47,000, the 50% retracement of the April highs to June lows. The rally continues to have momentum though so this resistance may not hold for long, with $50,000 and $51,000 above providing an interesting test.

Having broken through the 200-day SMA, the crypto is very much back in bullish territory and $50,000-51,000 may be all that stands in the way of another surge to record levels. We could be in for an interesting few months for cryptos.

Reports late last night of a $600m hack have done nothing to shake sentiment in the cryptocurrency space, despite it being the largest hack in history. While a massive story, it seems traders aren’t concerned, something that perhaps we wouldn’t have seen a few years ago. With $258m having now been returned, it would appear efforts to prevent the culprit getting away with the funds are bearing fruit, although there’s still some way to go.

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