Yahoo Finance U.S. Consumer Inflation Uptick Enough to Solidify December Rate Hike
Many U.S. financial markets posted two-sided trades on Wednesday as investors reacted to lingering issues over a delay in U.S. tax reform and key reports on retail sales and consumer inflation.
Volatility was present in the Forex, Treasury, and stock markets early yesterday as investors gauged the likelihood of a tax-reform plan becoming law before year-end. Several key issues remain that could lead to a prolonged debate between the U.S. House and the U.S. Senate as they try to hammer out their differences.
On Wednesday, House Speaker Paul Ryan told CNBC’s “Squawk Box” that the House will not repeal the Obamacare individual mandate before the Senate does. However, a revised version of the Senate’s tax plan includes a measure that effectively repeals a law requiring most Americans to buy health insurance or pay a tax penalty.
Republican Sen. Ron Johnson announced his opposition to the Senate tax plan as currently written. The Wisconsin legislator is the first GOP senator to voice explicit opposition to the proposal; Johnson’s objection stems from his feeling that the plan disproportionately favors corporations, according to The Wall Street Journal.
U.S. Economic News
In economic news, data showed a surprise rise in retail sales last month and an uptick in underlying inflation, solidified the chances for an interest rate hike in December.
The Labor Department said on Wednesday its Consumer Price Index edged up 0.1 percent last month after jumping 0.5 percent in September. Traders were looking for an increase of 0.1 percent in October.
U.S. Retail Sales rose 0.2 percent last month. Economists had expected an unchanged reading.
U.S. Treasury Markets
Although the CPI data likely cemented expectations for an interest rate hike in December, U.S. government debt traders didn’t like the news. U.S. government debt yields declined on Wednesday as investors read the data as tame.
Also of note, the spread between the 2-year Treasury note and the 10-year Treasury note hit a fresh low of 0.634, its lowest level since November 2007 when the spread closed at 0.5875. This sometimes signals a recession.
Gold
Gold prices fell on Wednesday as investors reacted to upbeat economic data which boosted the chances of interest rate hikes in December and perhaps as many as three times in 2018.
The whip-saw action by the U.S. Dollar produced a similar move in gold. The precious metal remains capped by concerns over rising interest rates and supported by weakness in U.S. equity markets.
Crude Oil
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures closed lower on Wednesday after government data showed an unexpected rise in crude and gasoline stockpiles. However, an increase in refining runs and a drawdown in distillates helped limit losses.
According to the U.S. Energy Information Administration, crude oil inventory rose 1.9 million barrels the week-ending November 10. Traders were looking for a draw of 2.1 million barrels. The number was still lower than the 6.5 million-barrel rise reported by the American Petroleum Institute.
Gasoline stocks rose 894,000 barrels, compared with forecasts for a 919,000-barrel drop. Distillate stocks fell 799,000 barrels, versus expectations for a 1.3 million-barrel drop.
This article was originally posted on FX Empire
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