U.S. June CPI all positive! Gold strong above $2400 USD

Inflation in the United States cooled in June, further boosting the confidence of Federal Reserve officials that the Fed may cut interest rates soon.

Data released on Thursday showed that the year-on-year unadjusted core CPI in the United States for June recorded 3.3%, lower than the market's expected 3.4%, dropping to the lowest level since April 2021. The month-on-month adjusted core CPI for June recorded 0.1%, the smallest increase since August 2021, with market expectations at 0.2%.

Economists believe that core indicators can better reflect underlying inflation than the overall CPI. Dragged down by falling gasoline prices, the overall CPI index fell by 0.1% from the previous month, marking the first decline since the outbreak of the COVID-19 pandemic; the year-on-year growth rate fell to 3%.

After the data was released, gold broke through the $2400 mark strongly; silver rose nearly 3% intraday, briefly surpassing $32; the US dollar index fell more than 40 points in the short term; non-US currencies generally rose, with the euro rising nearly 50 points against the US dollar in the short term; the pound rose over 60 points against the US dollar; and the US dollar fell by 90 points against the Japanese yen in the short term.

Following the CPI data release, traders expect a 25% chance that the Federal Reserve will cut interest rates by 25 basis points for the third time this year.

The moderation of inflation in the United States in June exceeded economists' expectations, further extending the recent trend of slowing price increases. There are strong signs that the economy has cooled, although not enough to trigger serious concerns about an economic recession, but enough to prompt Federal Reserve officials to change their tone, as they increasingly talk about the risks of economic slowdown, despite inflation rates remaining above the 2% target. Recent data on household consumption, construction spending, and service sector activity have all fallen below economists' expectations, lowering expectations for economic growth in the three months ending in June.

Gregory Faranello, Head of US Rates Trading and Strategy at AmeriVet Securities, stated that the US economy has weakened and inflation rates are declining. This is a positive situation for the Federal Reserve, as it is expected that employment and inflation data will be more favorable in the coming months, leading the Fed to start cutting interest rates, albeit slowly and cautiously.

Later data released showed that initial jobless claims in the United States last week fell more than expected, but at this time of year, the interpretation of the job market is made more difficult due to automakers shutting down factories for retooling.

The US Department of Labor stated on Thursday that initial jobless claims for the week ending July 6 decreased by 17,000 to 222,000, the lowest level since the end of May.

Initial claims data include the Independence Day holiday. Around holidays, initial claims tend to fluctuate. Automakers typically start shutting down assembly plants from the week of July 4 for retooling. However, the timing may vary among different manufacturers, which could cause the government's models used to smooth seasonal fluctuations in data to fail While this may introduce noise to the initial data, there are increasing signs that as the Federal Reserve significantly raises interest rates in 2022 and 2023, economic activity is cooling down and the labor market is losing momentum.

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