The U.S. released April unadjusted CPI annual rate, recorded 4.2%, the highest value since September 2008, also much higher than the expected 3.6%. April quarterly CPI monthly rate recorded 0.8%, higher than the previous value of 0.6%.
The 10-year U.S. bond yield jumped briefly after the data was released and is now at 1.65%, up 1.65% for the day. The U.S. 5-year inflation-protected bond (TIPS) break-even inflation rate rose to 2.767%, the highest since 2011.
Gold staged a decline followed by a rise. Immediately after the release of the data spot gold extended its short term decline to $10, hitting a low of $1821. The most active gold futures contract on the COMEX was traded at 20:32 within one minute of the buying and selling panel instantly trading contracts worth a total of $576 million.
The COMEX most active gold futures contract at 20:46 a minute trading contracts worth a total of $ 542 million.
In the currency market, the U.S. dollar index rose nearly 30 points in the short term; non-U.S. currencies weakened collectively, with the pound falling about 30 points against the dollar in the short term, the euro falling about 50 points against the dollar in the short term, and the Australian dollar falling nearly 40 points against the dollar.
U.S. technology stocks were sold off badly, with the Nasdaq 100 futures expanding to 1.5%; the Dow futures once fell 200 points.
The U.S. CPI recorded the largest increase since 2009 in April, with used car costs recording a record rise and as rising demand allowed companies to pass on costs, indicating that inflationary pressures are building.
Over the past 12 months, the CPI index for all items excluding food and energy rose 3.0%, the largest 12-month increase since January 1996; the chain rose 0.92%, the largest increase since 1981, writes Zero Hedge.
Energy and core services growth were probably the biggest contributors, with the services CPI soaring 4.4% year-over-year, the highest level since 1991; in addition, the used car and truck index increased 10.0%, the largest increase ever.
Market Commentary: Rate hike expectations heat up, leaving more pressure on the Fed
So what do market analysts think of this data?
CNBC pointed out that the overall CPI in April was the highest since 2008. Overall energy prices rose 25% from a year ago, with gasoline prices up 49.6%. Used car and truck prices, considered a key inflation indicator, soared 21 percent, including a 10 percent increase in April alone. In addition to higher prices, one of the main reasons for the sharp rise in the annual rate is the base effect, which means that with the widespread shutdown of the U.S. economy due to the new crown epidemic, inflation levels in 2020 are very low and CPI is feared to continue to be influenced by this factor in the coming months.
According to the financial website Forexlive, this data is very surprising and the dollar is appreciating. Everyone expected a rally due to the base effect, but the magnitude really surprised the market and will test the determination of the US Federal Open Market Committee and the market’s determination to see through bottlenecks or temporary factors.
While Fed officials and economists see this as a temporary climb, it is unclear whether inflationary pressures are continuing to rise against the backdrop of soaring commodity prices, the government’s trillion-dollar stimulus package and the first signs of rising labor costs.
Notably, market expectations for a rate hike have risen since the data were released – the U.S. money market sees a 100% probability that the Fed will raise rates by 25 basis points by December 2022, compared with 88% before the release of the U.S. CPI data.