High inflation sinks S&P 500, gold prices as traders flock to USD

Data current as of 2/13/2024

Key points

• CPI inflation beat expectations by 0.2%: (0:30)
• S&P 500 fell from all-time highs: (2:05)
• Gold prices hit YTD lows near $2000: (3:38)
• Dollar has moved against gold, S&P: (4:48)
• Dollar hit YTD high against yen: (5:20)

Hot CPI data shakes stocks, gold

January Consumer Price Index (CPI) inflation data has presented an unexpected turn, exceeding forecasts by 0.2%. Headline inflation came in at a persistent 3.1% and core inflation held firm at 3.9% on a year-over-year basis. These figures suggest that inflationary pressures are more tenacious than previously anticipated, potentially altering the course of monetary policy and impacting markets.

The S&P 500 Index (SPX), a barometer for US equities, experienced a sharp reversal from its all-time highs, retreating after surpassing the 5000 mark on February 9th. This pullback reflects the market's reaction to inflation concerns, which can erode corporate profits and reduce the present value of future earnings. Historically, periods of high inflation have often led to increased market volatility and a reevaluation of asset prices.

Concurrently, gold, a non-interest bearing asset, has seen its prices drop to year-to-date lows near $2000 per ounce following the US inflation data. Traditionally, gold has been viewed as a store of value during times of economic uncertainty, but its recent dip suggests that investors may be looking elsewhere for returns or reassessing the metal's role in the current economic environment.

US dollar surges off data

US dollar (USD) has exhibited a negative correlation to both gold and US stocks in recent months. This inverse relationship means that historically as the dollar strengthens, both gold and stocks tend to move in the opposite direction. This flock to USD was in part due to shifting expectations of future interest rates - now thinking the Fed will keep rates higher for longer. The dollar's strength is evident with USD/JPY breaking above 150.00 for the first time since November, marking a year-to-date high. This brings US dollar close to 30-year highs against the Japanese yen.

How to trade US dollar

1. Open an account to get started, or practice on a demo account
2. Choose your forex trading platform
3. Open, monitor, and close positions on USD pairs

Trading forex requires an account with a forex provider like tastyfx. Many traders also watch major forex pairs like EUR/USD and USD/JPY for potential opportunities based on economic events such as inflation releases or interest rate decisions. Economic events can produce more volatility for forex pairs, which can mean greater potential profits and losses as risks can increase at these times.

You can help develop your forex trading strategies using resources like tastyfx’s YouTube channel. Once your strategy is developed, you can follow the above steps to opening an account and getting started trading forex.

Your profit or loss is calculated according to your full position size. Leverage will magnify both your profits and losses. It’s important to manage your risks carefully as losses can exceed your deposit. Ensure you understand the risks and benefits associated with trading leveraged products before you start trading with them. Trade using money you’re comfortable losing.