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Markets Remain Calm As US Inflation Data Dominates This Week’s Headlines

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Nifty 50 and Sensex closed near their lowest points for the week at 22,055.20 and 72,664.47 respectively

(CTN News) – A softer-than-anticipated April U.S. Inflation payroll report and the Federal Reserve’s policy statement have bolstered expectations for interest rate reductions this year.

The markets have priced in a 61.2% chance of rate reductions of some kind beginning with the September meeting of the Federal Reserve, with a total of approximately 50 basis points of cuts anticipated, according to the CME’s FedWatch Tool.

Nonetheless, last week’s speakers were divided as to whether or not interest rates were sufficiently elevated, prompting a variety of responses from Fed officials. A study published on Friday revealed that there has been a rise in consumers’ inflation expectations, potentially adding to the complexity of the situation.

Analysts at Westpac stated in a note to clients, “The increase in inflation expectations is likely attributable to the stagnation of disinflationary efforts and will contribute little to the reduction of price pressures.”

Investors are monitoring the persistence of inflation in light of recent data indicating that the economy may be decelerating. The market will have an opportunity to assess this concern through the release of inflation data this week, specifically the producer pricing index (PPI) on Tuesday and the consumer price index (CPI) on Wednesday.

Moreover, Jerome Powell, chairman of the Federal Reserve, is expected to deliver a speech on Tuesday at the Foreign Bankers’ Association conference in Amsterdam.

As stated by Matt Simpson, a senior market analyst at City Index, “for the U.S. dollar to fall apart completely, incoming data must indicate disinflation as opposed to sporadic pockets of weakness.”

“An improvement in growth and a slight improvement in employment figures will surely be wiped out if inflation figures tick higher again this month.”

Following its first weekly increase in two weeks, the dollar index, which measures the value of the US dollar relative to a basket of other currencies, remained essentially unchanged at 105.34 this week.

Friday, in anticipation of the euro zone’s inflation report, the euro maintained its value at $1.0769.

The daily decline in sterling was 0.03%, but the value remained unchanged at $1.2517. In the second half of last year, the United Kingdom economy emerged from the brief recession it had entered, according to data released on Friday. Growth for the first quarter was the highest in nearly three years.

The yen fell 0.11 percent to 155.91. The dollar experienced a significant increase subsequent to two purported interventions by Japanese authorities, which resulted in a 3% weekly percentage decline at the start of the month. This decline is the largest since early December 2022.

Non-commercial short positions on yen futures have declined from 179,919 contracts on April 23, the highest level since June 2007, according to data from the CFTC. This remains the case notwithstanding the market’s continued pessimism regarding the Japanese yen.

Additional intervention will be met with market skepticism as the yen progressively depreciates.

At 7.2352, the Chinese offshore yuan remained stable at its lowest level in a week.

Consumer prices in China increased in April, whereas producer prices continued to decline, according to data released over the weekend. This indicates that domestic demand is strengthening in tandem with the government’s efforts to overcome challenges and bolster a faltering economy.

The central bank made a commitment to provide assistance in the process of reviving the economy.

In the previous round, bitcoin cost $61,682.00, a 1.99% increase.

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Salman Ahmad is a seasoned writer for CTN News, bringing a wealth of experience and expertise to the platform. With a knack for concise yet impactful storytelling, he crafts articles that captivate readers and provide valuable insights. Ahmad's writing style strikes a balance between casual and professional, making complex topics accessible without compromising depth.

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