(May 13) The U.S. Consumer Price Index (CPI) data for April was released, showing that inflationary pressures have eased, providing a mixed signal to the market. The headline CPI rose 0.2% month-on-month, lower than the expected 0.3%, and fell from 2.4% to 2.3% year-on-year, also lower than the expected 2.4%. The core CPI (excluding food and energy) rose 0.2% month-on-month (expected 0.3%) and remained flat at 2.8% year-on-year, in line with expectations. This mild data below expectations, coupled with the uncertainty of recent tariff policies, triggered an immediate market reaction and reshaped the Fed's expectations of rate cuts. Although the data was dovish, the market reaction was not completely one-sided, showing a game of caution and optimism.
The market background before the release was quite sensitive. Investors are dealing with volatility caused by recent trade policy comments, and risk assets are unstable. U.S. stock index futures were already weak before the data was released, and the VIX index climbed, reflecting market tensions. At the same time, the U.S. dollar index (DXY) is in a technical consolidation stage, and traders are closely watching key points to determine the direction of breakthrough or decline. Against this backdrop, the CPI data became a key turning point, providing clues for the Fed's next policy and market sentiment.
After the CPI data was released, spot gold rose slightly by $6 in the short term. The US dollar index quickly fell by about 14 points, hitting an intraday low of around 101.40, reflecting the failure of some traders' expectations of "sticky inflation". However, the decline did not last, and DXY subsequently rebounded by about 18 points to 101.54, indicating buying intervention and reassessment of the data. This resilience is consistent with the judgment of previous technical analysis - the 60-minute chart pointed out that 101.43 (lower Bollinger band) is a key short-term support. The rapid rebound suggests that the market sees the mild CPI as a short-term fluctuation rather than a trend change, especially considering that the core CPI remains at 2.8% year-on-year.
The bond market reacted equally quickly. The yield on the 10-year US Treasury bond fell back to 4.429%, down a few basis points from before the data was released, reflecting the weakening expectations of continued inflationary pressures. The yield on two-year Treasury bonds also fell slightly to 3.975%, indicating that the market has partially lifted hawkish bets. The stock market reaction was more complicated. U.S. stock index futures, which were under pressure before the data release, stabilized after the CPI was released, and S&P 500 futures narrowed their losses.
Some observers pointed out that the "severe squeeze" in the futures market has temporarily eased, and the data has alleviated market concerns about runaway inflation.
Breaking down the CPI composition, the data showed signs of cooling. Energy CPI fell 3.7% year-on-year, further down from 3.3% in March, driven by falling fuel prices. Food CPI fell from 3.0% to 2.8% year-on-year, and housing CPI remained flat at 4.0% year-on-year, indicating that rental cost pressures remain. New car CPI rose only 0.3% year-on-year, and used car and truck CPI rose from 0.6% to 1.5% year-on-year, suggesting the resilience of some commodity prices. However, real weekly wages fell 0.1% month-on-month, reversing the 0.3% growth in March, highlighting the pressure on consumer purchasing power.
Market sentiment and Fed expectations: a delicate balance
Lower-than-expected CPI data boosted expectations of a Fed rate cut, with traders now betting on the first rate cut in September and the second in October. This contrasts with a previous forecast by a well-known agency, which postponed its rate cut expectations from September to December due to inflation risks caused by tariffs. The mild CPI data suggests that the Fed may have more room for easing if the effects of tariffs have not yet appeared. A chief economist said that inflation may peak at 3.4% in the fourth quarter of 2025, lower than the previous forecast of 4.0%, reflecting optimism about easing trade tensions.
Institutional views tend to be cautiously optimistic. U.S. stock index futures fell and VIX rose before the CPI was released, but comments turned to relief after the data was released, and some analysts believed that the data "bought time" for the Fed to maintain the interest rate range of 4.25%-4.50%. Retail investors are divided. However, the April CPI may only reflect the weak impact of tariffs, and the May data will be the real test.
Some analysts also believe that the reduction of tariffs on some goods from 145% to 30% will limit the upside of inflation, making the data of limited significance for the Fed's policy. This divergence reflects the polarization of retail investor sentiment: some people see CPI as a buying signal for risky assets, while others believe it is just a temporary respite.
Compared with expectations before the data was released, the market's dovish tendency is not entirely unexpected. Previous technical analysis pointed out in the 60-minute chart that DXY is weak in the short term, with 101.43 as key support and 101.66 (the middle track of the Bollinger Band) as potential resistance. After the release of CPI, DXY fell to 101.40 and rebounded to 101.54, which just fits this framework, implicitly verifying the judgment that there is limited short-term downside. On the 4-hour chart, the "golden cross" signal of the 12-period and 26-period moving averages (101.23 and 100.61) shows a medium-term bullish trend. Although CPI did not meet expectations, DXY has not fallen to 100.90, supporting the technical view of medium-term upward.
Institutional and retail interpretation: signal and noise
Institutional analysis tends to favor a "soft landing" narrative. A well-known institutional economist said that the CPI data supports the Fed's gradual easing cycle and that the threat of tariffs to inflation is controllable. This contrasts with pre-release concerns that sticky inflation would push up hawkish expectations. The 0.2% month-on-month CPI (close to the Cleveland Fed's forecast) showed stability as falling energy prices offset the potential push for commodity prices from tariffs. This is close to the pre-release expectation of 0.3% month-on-month "sticky inflation", but the softness of the actual data suggests that the impact of tariffs has not yet fully emerged.
Among retail traders, some traders believe that CPI provides breathing space for risky assets, delays the effects of tariffs, delays recession and stagflation risks, and extends the "timer" of market fluctuations. Some traders also believe that tariffs may be "deflationary" in the short term, citing lower-than-expected CPI. Although this view is eye-catching, it ignores the lag in the effects of trade policies, and the April data may reflect more inventory dynamics before tariffs.
Future Outlook: Cautious Advance
The CPI data provides some breathing space for the market. In the short term, mild inflation supports risk assets, the stock market may stabilize, and the US dollar consolidates above 101.40. Treasury yields may fluctuate around current levels, with 10-year 4.43% and 2-year 3.975% as short-term pivots. However, the market focus is shifting to May CPI, which will more fully reflect the impact of tariffs. If inflation is as some economists predict (3.4% year-on-year in the fourth quarter of 2025), the Fed's September rate cut may be delayed, and DXY may rise to 102.14 or even higher.
In the long run, geopolitical risks such as Fed policy, tariff dynamics, and the situation between Russia and Ukraine will jointly shape market trends. Technically, DXY still has a medium-term upward trend, with 100.90-101.23 as key support and 102.60 as a potential upward target. However, if inflation unexpectedly accelerates or tariff rhetoric resurfaces, market volatility may intensify.
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The market background before the release was quite sensitive. Investors are dealing with volatility caused by recent trade policy comments, and risk assets are unstable. U.S. stock index futures were already weak before the data was released, and the VIX index climbed, reflecting market tensions. At the same time, the U.S. dollar index (DXY) is in a technical consolidation stage, and traders are closely watching key points to determine the direction of breakthrough or decline. Against this backdrop, the CPI data became a key turning point, providing clues for the Fed's next policy and market sentiment.
After the CPI data was released, spot gold rose slightly by $6 in the short term. The US dollar index quickly fell by about 14 points, hitting an intraday low of around 101.40, reflecting the failure of some traders' expectations of "sticky inflation". However, the decline did not last, and DXY subsequently rebounded by about 18 points to 101.54, indicating buying intervention and reassessment of the data. This resilience is consistent with the judgment of previous technical analysis - the 60-minute chart pointed out that 101.43 (lower Bollinger band) is a key short-term support. The rapid rebound suggests that the market sees the mild CPI as a short-term fluctuation rather than a trend change, especially considering that the core CPI remains at 2.8% year-on-year.
The bond market reacted equally quickly. The yield on the 10-year US Treasury bond fell back to 4.429%, down a few basis points from before the data was released, reflecting the weakening expectations of continued inflationary pressures. The yield on two-year Treasury bonds also fell slightly to 3.975%, indicating that the market has partially lifted hawkish bets. The stock market reaction was more complicated. U.S. stock index futures, which were under pressure before the data release, stabilized after the CPI was released, and S&P 500 futures narrowed their losses.
Some observers pointed out that the "severe squeeze" in the futures market has temporarily eased, and the data has alleviated market concerns about runaway inflation.
Breaking down the CPI composition, the data showed signs of cooling. Energy CPI fell 3.7% year-on-year, further down from 3.3% in March, driven by falling fuel prices. Food CPI fell from 3.0% to 2.8% year-on-year, and housing CPI remained flat at 4.0% year-on-year, indicating that rental cost pressures remain. New car CPI rose only 0.3% year-on-year, and used car and truck CPI rose from 0.6% to 1.5% year-on-year, suggesting the resilience of some commodity prices. However, real weekly wages fell 0.1% month-on-month, reversing the 0.3% growth in March, highlighting the pressure on consumer purchasing power.
Market sentiment and Fed expectations: a delicate balance
Lower-than-expected CPI data boosted expectations of a Fed rate cut, with traders now betting on the first rate cut in September and the second in October. This contrasts with a previous forecast by a well-known agency, which postponed its rate cut expectations from September to December due to inflation risks caused by tariffs. The mild CPI data suggests that the Fed may have more room for easing if the effects of tariffs have not yet appeared. A chief economist said that inflation may peak at 3.4% in the fourth quarter of 2025, lower than the previous forecast of 4.0%, reflecting optimism about easing trade tensions.
Institutional views tend to be cautiously optimistic. U.S. stock index futures fell and VIX rose before the CPI was released, but comments turned to relief after the data was released, and some analysts believed that the data "bought time" for the Fed to maintain the interest rate range of 4.25%-4.50%. Retail investors are divided. However, the April CPI may only reflect the weak impact of tariffs, and the May data will be the real test.
Some analysts also believe that the reduction of tariffs on some goods from 145% to 30% will limit the upside of inflation, making the data of limited significance for the Fed's policy. This divergence reflects the polarization of retail investor sentiment: some people see CPI as a buying signal for risky assets, while others believe it is just a temporary respite.
Compared with expectations before the data was released, the market's dovish tendency is not entirely unexpected. Previous technical analysis pointed out in the 60-minute chart that DXY is weak in the short term, with 101.43 as key support and 101.66 (the middle track of the Bollinger Band) as potential resistance. After the release of CPI, DXY fell to 101.40 and rebounded to 101.54, which just fits this framework, implicitly verifying the judgment that there is limited short-term downside. On the 4-hour chart, the "golden cross" signal of the 12-period and 26-period moving averages (101.23 and 100.61) shows a medium-term bullish trend. Although CPI did not meet expectations, DXY has not fallen to 100.90, supporting the technical view of medium-term upward.
Institutional and retail interpretation: signal and noise
Institutional analysis tends to favor a "soft landing" narrative. A well-known institutional economist said that the CPI data supports the Fed's gradual easing cycle and that the threat of tariffs to inflation is controllable. This contrasts with pre-release concerns that sticky inflation would push up hawkish expectations. The 0.2% month-on-month CPI (close to the Cleveland Fed's forecast) showed stability as falling energy prices offset the potential push for commodity prices from tariffs. This is close to the pre-release expectation of 0.3% month-on-month "sticky inflation", but the softness of the actual data suggests that the impact of tariffs has not yet fully emerged.
Among retail traders, some traders believe that CPI provides breathing space for risky assets, delays the effects of tariffs, delays recession and stagflation risks, and extends the "timer" of market fluctuations. Some traders also believe that tariffs may be "deflationary" in the short term, citing lower-than-expected CPI. Although this view is eye-catching, it ignores the lag in the effects of trade policies, and the April data may reflect more inventory dynamics before tariffs.
Future Outlook: Cautious Advance
The CPI data provides some breathing space for the market. In the short term, mild inflation supports risk assets, the stock market may stabilize, and the US dollar consolidates above 101.40. Treasury yields may fluctuate around current levels, with 10-year 4.43% and 2-year 3.975% as short-term pivots. However, the market focus is shifting to May CPI, which will more fully reflect the impact of tariffs. If inflation is as some economists predict (3.4% year-on-year in the fourth quarter of 2025), the Fed's September rate cut may be delayed, and DXY may rise to 102.14 or even higher.
In the long run, geopolitical risks such as Fed policy, tariff dynamics, and the situation between Russia and Ukraine will jointly shape market trends. Technically, DXY still has a medium-term upward trend, with 100.90-101.23 as key support and 102.60 as a potential upward target. However, if inflation unexpectedly accelerates or tariff rhetoric resurfaces, market volatility may intensify.
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Continuously release precise trading plans to lead members to expand profits, with a stable profit of 988% every month. If you have not made a profit yet, then join us. t.me/fahsufnwks
Penafian
Maklumat dan penerbitan adalah tidak dimaksudkan untuk menjadi, dan tidak membentuk, nasihat untuk kewangan, pelaburan, perdagangan dan jenis-jenis lain atau cadangan yang dibekalkan atau disahkan oleh TradingView. Baca dengan lebih lanjut di Terma Penggunaan.