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⚡ Crude Oil Inventories⚡
Significant deviations in crude oil inventory data often lead to volatility in oil prices. For example, a similar unexpected drawdown in May 2022 led to a 6% increase in crude oil prices over the following week. This week's drawdown might suggest a potential price increase, influencing energy stocks and related sectors.
🧠 CPI and Inflation Trends 🧠
The current decrease in YoY CPI from 3.3% to 3.0% is reminiscent of the post-2008 financial crisis period. During that time, lower inflation expectations led to rallies in long-term bonds, with the 10-year Treasury yield dropping from 3.5% in early 2009 to below 2.0% by the end of 2010. Investors might anticipate continued moderation in inflation, potentially affecting Federal Reserve policies and bond markets.
💎 Jobless Claims 💎
The improvement in initial jobless claims to 222,000 recalls periods of robust labor market performance. In April 2019, similar improvements in jobless claims correlated with a 4.0% rise in the S&P 500 over the subsequent two months, supporting consumer spending and overall economic growth.
🔔 Interest Rate Decisions 🔔
The steady rate from the RBNZ (The Reserve Bank of New Zealand) at 5.50% mirrors past instances where central banks opted for stability. In July 2016, when the Bank of England held rates steady amid Brexit uncertainties, the GBP/USD exchange rate remained stable around 1.32 for several weeks. This could signal a cautious approach that investors might expect from other central banks, including the Federal Reserve.
💥 Bond Yields 💥
The slight decrease in the 10-year note auction yield from 4.438% to 4.276% may indicate investor expectations of slower economic growth. Similar yield trends were observed in 2014, driving up bond prices and lowering yields. The Bloomberg Barclays US Aggregate Bond Index gained 5.97% over that year.
⚡ PPI Data ⚡
The rise in the Producer Price Index by 0.2% could signal cost pressures in the supply chain. In June 2018, a similar rise in PPI preceded a 0.4% increase in CPI over the next three months, indicating potential inflationary trends. This led to a 3.1% increase in the US Dollar Index (DXY) over the same period.
💎 Equity Market Performance 💎
Equity markets have shown varied responses to macroeconomic data. During the period of declining inflation in 2010, the S&P 500 gained 12.8% over the year as lower inflation led to lower interest rates, supporting equities.
🚨 Currency Movements 🚨
Currency markets often react to inflation data and interest rate decisions. For example, a decrease in the US CPI might weaken the USD. In June 2017, when CPI data showed a similar trend, the USD depreciated by 2.5% against the EUR over the following month.
Best regards,
Alessandro
Founder of Macro Mornings