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July 2023’s CPI data affects TradFi and DeFi markets on even ground – Here’s how

TL;DR

  • CPI rose 3.2% from the same month a year ago in July, slightly below expectations. The 12-month rate of the core CPI was 4.7%, also below expectations. Both metrics increased by 0.2% month-over-month.
  • Shelter costs rose 0.4% month-to-month and 7.7% year-over-year, accounting for nearly all of the monthly inflation rise.
  • While inflation has come well off its 40-year highs of mid-2022, it is still considerably above the 2% level where the Federal Reserve would like it.

In July, the consumer price index (CPI) increased 3.2% over the previous year, indicating that inflation has lost at least some of its grip on the US economy.

The Bureau of Labour Statistics announced Thursday that prices increased by a seasonally adjusted 0.2% for the month, in line with the Dow Jones projection. The annual rate, however, was somewhat lower than the 3.3% anticipated, though higher than in June and the first gain in more than a year.

July’s CPI data is out – Here’s a summary

Excluding volatile food and energy prices, the so-called core CPI increased 0.2% for the month, in line with expectations and equating to a 12-month rate of 4.7%, the lowest since October 2021. The annual rate for the core was also marginally below the consensus estimate of 4.8% from the Dow Jones.

Futures linked to the Dow Jones Industrial Average increased by more than 200 points in response to the report, while Treasury yields decreased for the most part.

Almost all of the monthly inflation increase came from housing expenses, which increased 0.4% and were 7.7% higher than a year ago. Rents increased by 0.4%. According to the BLS, that category accounted for more than 90% of the rise, which accounts for almost one-third of the CPI weighting.

Food costs were up 0.2% month on month, while energy prices rose 0.1%, despite the fact that crude oil prices rose and petrol prices rose as well.

Used vehicle prices fell 1.3%, while medical care services fell 0.4%. Airline fares declined 8.1% month over month, matching June, and are down 18.6% year over year after spiking in the early days of the Covid epidemic.

The relatively low levels of inflation aided in raising worker wages. According to a second announcement from the BLS, real wages climbed 0.3% month over month and 1.1% year over year.

While the annual headline inflation rate was lower than expected, it was higher than the 3% level in June.

The most recent figures show that, while inflation has fallen from its 40-year highs in mid-2022, it is still far above the 2% threshold desired by the Federal Reserve and high enough that interest rate cuts are unlikely anytime soon.

Here’s how markets stand after the CPI data

Thursday was a wild day on Wall Street. Initially bolstered by lower-than-expected CPI inflation figures, major indexes fell flat as fears about the US economy’s long-term prospects began to outweigh optimism. Investors began to speculate on whether equities could still rise.

Following a five-month streak of gains led primarily by IT titans, both the S&P 500 and the Nasdaq Composite enjoyed only their second positive day in August. These gains, however, become profit-taking chances.

Technology valuations, which are significantly influenced by interest rate swings, were put to the test. Notably, stocks in top technology companies such as Apple and Nvidia fell somewhat, while others such as Alphabet stayed stable. Any potential expansion in these tech behemoths was hampered further by a spike in 10-year US Treasury bonds. Notably, its yield surpassed 4% following a mediocre 30-year paper auction.

Oil prices are unchanged early on Friday as traders maintain their positions despite fluctuating global economic signals. As Asian markets opened for business, traders kept a close watch on the balance between OPEC’s optimistic demand forecasts and China’s shaky economic data, the largest oil consumer in the world.

The Organisation of Petroleum Exporting Countries (OPEC) recently reaffirmed its projections, predicting a 2.44 million barrels per day (bpd) increase in global oil demand in 2023 and a 2.25 million bpd increase in 2024.

The EUR/USD ended Thursday at $1.09808, up 0.06% from its opening price. The US CPI Report generated a turbulent afternoon. While inflation numbers fell shy of expectations, core inflation remained persistent, limiting the day’s upside.

This Friday, gold prices continue to hover near their one-month lows. This is despite the recent U.S. inflation figures being lower than anticipated. 

The precious metal is expected to experience its most difficult week in nearly two months due to the strong performance of the U.S. dollar and bond yields. Gold on the spot market rose by 0.1% to $1,913.95 per ounce, hovering near its lowest level since early July. In contrast, U.S. gold futures encountered a slight decrease.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decision.

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Florence Muchai

Florence is a crypto enthusiast and writer who loves to travel. As a digital nomad, she explores the transformative power of blockchain technology. Her writing reflects the limitless possibilities for humanity to connect and grow.

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