Log in to today’s North American session Market wrap for January 13
It seems that CPI day turned out to be less about the data itself and more about what lies beneath the surface.
Perhaps the as-expected release minimized volatility—Core CPI cooled to 2.6%, a very decent report, especially given the skepticism surrounding the previous soft print.
However, with another critical inflation report (PPI) looming tomorrow, traders may simply be keeping their powder dry waiting for further confirmation.
Asset classes traded in a chaotic fashion. We saw a classic knee-jerk rally in stocks and a drop in the Dollar upon release, only for both to violently reverse course.
The selloff in Stocks actually accelerated towards the end of the session, particularly for the Dow Jones.
Surprisingly, the US Dollar finished at the top of the FX major board today. This could be partly attributed to NY Fed President Williams’ late-session comments yesterday, indicating the Fed is comfortable with interest rates at “near neutral” levels.
However, the bid is likely driven more by geopolitical tension in Iran.
In the Metals complex, traders seem to be searching for direction, with most assets seeing low volatility or minor corrections. Silver however, remains the outlier.
The short squeeze appears to be continuing even without a broader metals rally, with the commodity tagging $89.13 before retreating.
This looks like max pain for shorts—if this marks the capitulation point, we could see a broader calming of the rally. We will monitor this closely tomorrow.
The two asset classes that truly stole the show today were Cryptos and Oil.
- Crypto: Digital assets are finding renewed attraction as inflation cools and traditional assets sit at extreme valuations. This breakout comes after a 1.5-month consolidation, suggesting a technical coiled spring was ready to release.
- Oil: Supply fears have finally gripped the market. After the post-Venezuela drop to $55, WTI surged to trade around $62 today. Markets are now aggressively pricing in the risk of supply disruption from the revolts in Iran.
As mentioned before, this Iran theme is also putting a bid under the US Dollar as a safe-haven, potentially being the next leg of the Freedom Trade to continue last week’s trend.
