Today, market participants will receive new data on inflation in the United States for May. Yesterday, US indices slid moderately ahead of important data: Dow -0.4%, S&P 500 -0.2%, NASDAQ -0.1%.
The market continues to trade in a very narrow range below the annual highs and is ready for a new wave of gains in case of lower inflation in the US in May against April.
Asian markets showed positive dynamics in the early trade: China +1.1%, Japan +0.4%.
COVID in the world: The third wave of the coronavirus stopped falling. Yesterday, there were +420K new cases in the world. Apparently, a sharp jump in the number of deaths in India by 6K can be seen as a statistical adjustment. As for the coronavirus situation in South America, Brazil posted +87K new cases, Argentina and Colombia reported +25K and +30K cases respectively. The situation in Europe is rather positive. The number of new infections in France and Britain increased by 5K and 6K yesterday. Russia reported +10.4K new cases due to a sharp rise in Moscow by over +4K. Moscow Mayor Sergei Sobyanin announced that the city's COVID-19 situation had worsened, and ordered to double the number of hospital beds. The situation in St. Petersburg is similar. Vaccination has had a positive effect in the US, Britain, and the EU. In Russia, the vaccine rollout is clearly lagging behind.
Today, oil is suffering losses. From its high, Brent fell by 0.8% to $71.60 as the market is nervous in anticipation of US data on inflation. Against the backdrop of higher prices, oil production in the United States rose by 0.2 million barrels over the week up to 11 million barrels per day. Crude inventories in the United States fell by 5.2 million barrels over the week, but distillate stocks climbed by 4.4 million barrels. Gasoline stockpiles increased by 7 million barrels.
S&P 500 is currently trading at 4220 within the range of 4180-4260. Biden and Johnson have vowed to speed up opening US-UK travel amid a successful vaccine rollout. The United States and Britain have agreed with G7 partners on a plan to strengthen global vaccine access. The G7 nations are expected to purchase 1.5 billion doses of COVID vaccines, of which 500 million doses will be acquired by the United States. The country will deliver 200 million doses to other countries this year and 300 million doses at the beginning of 2022. Deliveries will be taken by the COVAX Facility. For now, it is about Pfizer's vaccines, but Moderna's ones are also under consideration. Ahead of the inflation data, prices for US government bonds are growing, while bond yields are falling. The reason is that investors insure the risks of a steep fall in the market. The US 10-year Treasury yield fell below the 1.5% level.
US inflation is expected to rise by 0.4% in May from 0.8% in April (seasonally adjusted data).
USDX is trading at 90.20 within the range of 89.50–90.50. The market is awaiting not only the US inflation report but also the ECB's decision on monetary policy and ECB President Christine Lagarde's comments at a post-policy meeting press conference. Experts agree that the ECB will continue its policy of supporting the economy at the highest possible level. Europe has not yet recovered from the pandemic. The economic support program is in the spotlight. The inflation rate in Europe is lower than in the United States.
The USD/CAD pair is currently trading at 1.2115. Its trading range is 1.2050-1.2200. The US dollar has advanced to the upper border of recent weeks against the Canadian dollar and is ready to break above 1.2200 in case of today's positive news. Oil prices appear to be poised for a correction, which could also hinder the loonie in its efforts to strengthen.
Conclusion: Today is an important day for the market. We'll see how investors will react to US data on inflation, given a very likely decline in inflation, and whether they are ready to drag the US market up right now.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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