The major US equity index, the S&P 500, traded yesterday at a new all-time high, and still looks bullish as markets await US inflation data.

1. The S&P 500 Index rose yesterday to reach a new record high above 5,800. This is bullish behaviour ahead of today’s crucial US inflation data, which is expected to show a falling annualized rate from 2.5% to 2.3%. If the fall is stronger, we can expect stock markets and riskier currencies to rise firmly. If the fall is weaker than expected or we even see no change or a rise in the rate, we can expect a strong drop in stock markets and a big boost to the US Dollar.
2. The minutes of the most recent meeting of the US FOMC were released yesterday. They showed that a substantial minority only wanted to cut rates by 0.25% but they were outvoted by participants who thought the US economy was weaker than subsequent jobs and average earnings data showed it to be. This suggests we will see a more hawkish approach to rate cuts at the Fed’s next meeting in November. The CME’s FedWatch tool still suggests that 86% expect a 0.25% rate cut at the Fed’s next meeting.
3. Sentiment continues to be hawkish on the US Dollar after the trigger event last Friday, when considerably stronger than expected US jobs and average earnings data was released. The US Dollar Index (DXY) is now trading well above the former key resistance level at 102.25. This is a bullish sign for the greenback.
4. Since today’s Tokyo open, the strongest major currency has been the New Zealand Dollar, while the weakest has been the Japanese Yen.
5. Gold sold off further after reaching a new record high some days ago. If it closes below $2,570 most trend followers will give up on this long trade,
6. There will be a release of US CPI (inflation) data later today.

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