Global stock markets displayed resilience on Monday, managing to brush aside fears surrounding new tariffs. The U.S. enacted 25% levies on steel and aluminum imports late Monday night, raising concerns about potential economic disruptions. As investors anticipate the release of the Consumer Price Index (CPI) report, predictions suggest the core CPI will remain above the Federal Reserve's target, standing at 3.1% compared to a year ago. Such inflation data holds significant influence over market movements, with the S&P 500 and Eurostoxx 50 index expected to open lower today.
The Consumer Price Index serves as the first hard report on inflation, providing crucial insights into price movements. Analysts expect the CPI to show a 2.9% annual increase for January, mirroring December's figures. With the economic calendar pointing to a 0.3% rise in the CPI following a modest 0.2% increase in December, inflation concerns may be rearing their head even before the full impact of President Trump's tariffs takes effect.
The core CPI, which excludes volatile food and energy prices, is closely monitored by the Federal Reserve as it reflects price rises that can be influenced through interest rates. The month-on-month core CPI figure is particularly important, providing a more immediate glimpse into inflation trends. Currently, the annualized increase in core CPI stands at 3.6%, significantly surpassing the Fed's 2% target.
In currency markets, overnight hawkish remarks from Federal Reserve Chair Jerome Powell increased demand for the U.S. dollar. The GBP/USD pair clings to recovery gains near 1.2450 during the European session on Wednesday, while EUR/USD remains steady above 1.0350 in European trading hours.
Meanwhile, gold prices experienced pressure for the second consecutive day, as a modest uptick in the U.S. dollar attracted sellers. The precious metal's price movements highlight prevailing investor sentiment amid ongoing economic uncertainties.
As global markets navigate these developments, inflation remains a central concern for investors and policymakers alike. The incoming CPI report comes against a backdrop of fresh tariff reports emanating from the White House, potentially exacerbating inflationary pressures.