US Stocks Fall Amid Debt Ceiling Concerns and Inflation Data | Daily Market Analysis

Key events:

• USA - Core CPI (MoM) (Apr)
• USA - CPI (MoM) (Apr)
• USA - CPI (YoY) (Apr)
• USA - Crude Oil Inventories

On Wednesday, Asian stocks were experiencing difficulty making gains, and the dollar was steady as investors waited for US consumer price data, which could dash hopes for interest rate cuts if inflation does not show a significant decline. MSCI's Asia-Pacific shares index, excluding Japan, declined 0.4%, following a fall on Tuesday. The Nikkei in Japan fell 0.3%. S&P 500 futures were unchanged, while European futures rose 0.1%. The euro was pushed back below $1.10 to $1.0968 due to a strong US dollar.

At the same time, GBP has undergone a remarkable surge in recent weeks, placing it as the strongest currency among the G10 nations this year. The unexpected triumph of the GBP, now referred to as the "King of G10 FX," can be linked to various factors. Firstly, the rise can be credited to a series of favorable UK data releases in recent months, which were impacted by the significant decrease in European energy prices and the resulting progress in commodity terms of trade.

Furthermore, the ongoing UK inflation, combined with reduced tensions post-Brexit between the UK and the EU and decreased risks of another independence referendum, have amplified the appeal of GBP-denominated assets.

The price of gold rose on Wednesday due to safe-haven demand amid uncertainty over the US debt limit and slowing economic growth. The precious metal has established a new support level at $2,000 an ounce, following its brief record high last week amid increasing fears of a US recession this year. The Federal Reserve's recent signaling of a potential pause in its rate hike cycle also buoyed gold. The focus is on the key consumer price index inflation data due later in the day, which is likely to factor into the Fed's decision on rate hikes. While inflation is expected to have retreated slightly in April from the prior month, it is still expected to read well above the Fed's 2% annual target.

Concerns over slowing US economic growth also supported safe-haven demand for gold, as the country deals with high inflation and interest rates. The Fed recently warned that the US faces a mild recession this year.

Today is a significant day for the market as the US inflation data is set to be released. This data is crucial as it directly affects the Federal Reserve's interest rate decisions in the future, making it an important indicator for investors to monitor.

Of particular interest are the CPI index and the core CPI index, both of which are marked in red. The core CPI index is especially noteworthy because it excludes volatile components like energy, providing valuable insights alongside the overall CPI index. Investors will be closely watching these indicators for any signs of inflationary pressures, which could impact market sentiment and investment strategies