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On January 13th, Jeff Schulze, Head of Economics and Market Strategy at ClearBridge Investments, stated that while investors may cheer the CPI report as further evidence of cooling inflation, the Federal Reserve will likely remain on the sidelines due to the short time lag between the data and the government shutdown, and the inherent uncertainty. This report is positive for risk assets and increases the likelihood of the Fed providing additional monetary policy support in 2026.January 13th - Nick Timiraos, the Feds mouthpiece, stated that the December Consumer Price Index (CPI) is unlikely to change the Feds current wait-and-see attitude, as officials are likely to want to see more evidence that inflation is stabilizing and gradually declining before cutting interest rates. The Fed has lowered its benchmark interest rate in the last three meetings, most recently in December, even though inflation stopped declining last year. Officials lowered rates due to concerns about a potentially larger-than-expected slowdown in the labor market. For Fed officials to resume rate cuts, they may need to see new evidence that labor market conditions are deteriorating or that price pressures are easing. The latter may require at least several more months of inflation data to become apparent.January 13th - Morgan Stanley Wealth Management Chief Economic Strategist Alan Zentner commented on US inflation: "Weve seen this before—inflation hasnt picked up again, but it remains above target. Cost pass-through from tariffs remains limited, but housing affordability hasnt improved. Todays inflation report is insufficient to provide the necessary justification for the Federal Reserve to cut interest rates later this month."On January 13th, Valentin Malinoff, Head of G10 FX Research and Strategy at Crédit Agricole, believes that given the markets muted reaction to the CPI data, traders should buy the dollar when it falls from current levels. The muted market reaction further confirms that many negative factors related to the Federal Reserve have already been priced into the dollar, as expectations of two rate cuts in 2026 have already been priced in. It is also worth noting that even with the recent decline in the dollar due to heightened concerns about fiscal dominance, the market has not anticipated the timing of Fed rate cuts. Therefore, the dollars real interest rate advantage relative to the euro and pound is not fully reflected and is undervalued.January 13th - Art Hogan, Chief Market Strategist at B. Riley Wealth, commented on the US CPI report: Todays CPI report brought some positive news, with December inflation being more moderate than the market had previously expected. Overall CPI rose 2.7% year-on-year, in line with expectations; while core inflation was 2.6%, slightly lower than the markets original forecast of 2.7%. If this trend continues, it will provide the Federal Reserve with some policy flexibility to cut interest rates in the first quarter.

WTI corrects below $77.00 as buyers grow nervous ahead of the Caixin Manufacturing PMI

Daniel Rogers

Mar 01, 2023 11:42

After encountering stiffer resistance above $77.50 in the late New York session, West Texas Intermediate (WTI) futures on the New York Mercantile Exchange have sharply reversed. As investors wait for the Caixin Manufacturing PMI data to be released, the oil price has fallen to $76.60 and is expected to remain on edge.

 

There is no disputing that international organizations and investment banking firms are optimistic about a strong economic rebound in China following the administration's dismantling of pandemic controls following a three-year lockdown. The People's Bank of China (PBoC) has pledged a complete recovery in domestic demand through expansionary monetary policy, so China's post-pandemic period is anticipated to be robust.

 

Investors are anxiously awaiting February's figures after being taken aback by January's disappointingly low Caixin Manufacturing PMI data. A prolonged period of negativity would be detrimental to the market's oil prices. In general, investors continue to be risk cautious as they anticipate a bleak future due to aggressive Western central banks. And the current low Manufacturing PMI for China will make investors' risk aversion even worse.

 

The majority predicts that IHS Markit will issue the Caixin Manufacturing PMI at 50.2, up from the previous release of 49.2.

 

In addition to the Caixin Manufacturing PMI, the United States Energy Information Administration's (EIA) oil inventory data for the week concluding February 24 will be closely monitored.

 

Despite being smaller than the previous release of nearly 10 million barrels, US American Petroleum on Tuesday reported a massive stockpile of oil stockpiles of 6.20 million barrels. For the past three months, oil inventories have been steadily growing, pointing to a sharp drop in global consumption.


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