German Growth Stems Confidence | Focus On US CPI Number

  • German GDP and CPI data matches estimates
  • Investors await US CPI data and its reaction
  • Yen blast past 107
  • FTSE Futures +34

European markets and US futures are trading higher as traders get a boost from German growth. The solid german growth confirmation was enough to shake off all the negativity-at least for now. Having said that, there are still concerns about the US inflation data and this has been the primary reason (or shall we say an excuse) for the recent turmoil in the global markets. Asian markets had a mixed session ahead of the US CPI data and caution is the word which is more popular amid traders over in the European trading session. Year to date, most of the major indices are trading in a red territory, a sign that bears have overall control of the price. 
Inflation and labour data have been two important factors for the Fed through which they have been gauging the health of the US economy. And today’s CPI US number has gained the most attention since the US NFP number. This number is of critical importance as it would determine the future direction of the US equity market and the Goldilocks narrative is at the stack. A strong figure would have the potential to push the dollar index higher as it will fuel the speculations that the Fed is going to adopt a lot more hawkish tone in the market. However, the forecast is for 1.9% and the retail sales data would tell us the ultimate truth about the consumer health.
Strong wage data released earlier this month has also increased the importance of CPI and retail number. In the past, the CPI number has been something which the Fed has paid the least amount of importance to gauge inflation but today is not the today to have that stance.
If the ISM prices are anything to go by, the message which could be taken from that data is that the prices are rising. They are on the steepest path which is not witnessed since 2011. The qualm is that the Fed is behind the curve and the similar message egos when you turn your focus to other central banks. Luckily, the inflation number over in the U.K. remained steady yesterday at 3.0% but the governor of the Bank of England already thinks that there are chances this number may start to move higher again.
The core inflation over in the U.K. has triggered a wake-up call for those who only pay attention to the headline number. The core inflation number over in the U.K. jumped from 2.5% to 2.7%, a primary reason for Sterling to ... , and this has increased the odds for a further reaction by the BoE as soon as May. Something, which the consumers aren’t ready for at all.
For most traders, something which is equally important is the Vix option expiry date which is today. Liquidity is an important in the market and lack of liquidity calls for feeble confidence among investors.