Hello traders, and welcome to Wednesday — the first full day of trading after a heavy run of macro events. Yesterday’s spotlight was firmly on the U.S. CPI report, which came in slightly softer than expected at 2.7% versus the forecast of 2.8%. The reaction was immediate: the U.S. dollar weakened, as the softer reading aligned neatly with Jerome Powell’s narrative that inflation is coming under control. This should, in theory, give the Fed more breathing room on rates.
But the political pressure continues to mount. Donald Trump wasted no time in using the numbers as another opportunity to attack Powell, threatening to allow a lawsuit over the cost of ongoing renovations at the Federal Reserve buildings, and once again demanding rate cuts. That rhetoric rippled through the market, adding another layer of volatility on top of the inflation reaction.
The overall sentiment on equities remains bright. U.S. indices surged to long-term highs after the CPI print, and Japan’s Nikkei 225 joined the rally by notching fresh record levels. Commodities, however, were more mixed — silver is leading the way higher, gold initially dropped but recovered later, although it’s still lagging well behind silver. Oil is the clear laggard, pressing down to fresh lows early in the European session. On the currency side, the Japanese yen is catching a bid, the Swiss franc is losing some ground, and antipodean currencies — the Australian and New Zealand dollars — are opening the day strongly.
The calendar for Wednesday is relatively quiet. Overnight, Australia’s Wage Price Index matched expectations at 0.8%, bringing no lasting impact to AUD pairs. The only scheduled event today is a speech from Donald Trump, which as always, could shake markets depending on the topics he hits. But traders should keep one eye on tomorrow’s Asian session, when we’ll get Australia’s key employment report — a potential market mover for AUD and NZD pairs.