FX.co ★ US inflation's more noticeable decrease will lead to a rally in stock markets and weakening of the US dollar

The current week started quite calmly for the global markets after sharp movements last Friday against the background of strong US employment data, unexpectedly for the markets.

On Monday, the situation in the markets somewhat stabilized and even began to change. On the one hand, this is due to the complete recovery of Friday's values for the number of new jobs and the unemployment rate, as well as figures for the average hourly wage and the length of the working week in the United States.

Today, the market is already focused on the expected new events – the publication of US consumer inflation data, which will be released on Wednesday. It is assumed that both the basic and general values of consumer inflation will slow down the growth rate. If so, this should calm the markets and reduce fears that the Fed will start changing the monetary rate from a super-soft to a more rigid one by the end of this year. This means that the current exchange rate may last until 2023, which will continue to support the demand for company shares, weaken the dollar exchange rate and stimulate the emergence of new jobs in the US economy.

How will the markets react to the publication of data on consumer inflation?

If the values are in line with expectations, we expect it to put pressure on the US dollar, stimulate the growth of demand for commodity and raw materials assets, and increase the interest of market participants in the shares of companies not only in America.

There is another option for the development of events. If the figures will be higher than expected, this will lead to an increase in the dollar, pressure on demand for shares, and a resumption of falling prices for gold and other commodity assets. This will be a signal for the Federal Reserve to start discussing the topic of the timing of a change in monetary policy again.

For the last possible scenario, we believe that it is the most realistic. Given the latest data on the US economy, a more noticeable slowdown in the growth of inflationary pressure is more probable. If the data show a more noticeable decrease in inflationary pressure, this will lead to a noticeable plunged in the US dollar, a rally in the stock markets, and a return of gold and oil prices to their values of the middle of last week.

Forecast of the day:

The USD/JPY pair is likely to rise to the level of 110.60 and then to 110.80 after consolidating above the 110.35 mark.

The price of WTI crude oil is showing a local reversal amid increased positive market mood and expectations of a decline in crude oil inventories during the previous week. Its price may rise to the level of 73.05.