Daily Market Analysis From Forexmart

EUR/USD: euro holds ground despite stronger dollar

The US dollar started the day on a positive note, attempting once again to overtake its European counterpart. However, the euro is not giving up so easily and continues to fight for leadership in the EUR/USD pair. At the beginning of this week, the greenback retreated slightly, but quickly made up for its early losses.

According to analysts, the dollar's recent failures were temporary and were not able to drag the currency into negative territory. Neither the recent downgrade of the US credit rating nor the unstable macroeconomic data published by the US Department of Labor managed to undermine the greenback's position. In July, the US job market added 187,000 new jobs, following the 185,000 previously recorded. Although these figures fell short of the anticipated 205,000, experts assessed the overall macroeconomic outlook as positive.

Analysts often say that the Nonfarm Payroll (NFP) is one of the most unpredictable indicators. This is why any dramatic shifts in the market or any reviews of the Fed's current decision were highly unlikely. According to Austan D. Goolsbee, head of the Chicago Fed, the American job market should "find its balance" soon. The official had previously remarked that while the US labor market is cooling down, it's "still exceptionally hot."

According to estimates, overall employment growth in the US was slightly below expectations. However, the increase in wages and the decrease in unemployment rates might provide reasons for the Fed to consider another rate hike. The return of the unemployment rate to 3.5% is particularly noteworthy. Analysts believe this rate is now at cyclical lows, which continues to exert inflationary pressure. In this context, the Federal Reserve may find it hard to soften its stance, experts believe.

In addition to this, hourly wages grew more than expected (by 0.4% MoM) over the reporting period, maintaining an annual rate of 4.4% set earlier this year. With such wage growth, rates and employment figures, inflation is unlikely to ease. In the current scenario, the Fed might further tighten its monetary policy.

This sentiment is shared by Atlanta Fed President Raphael Bostic. Last Friday, August 4, he told Bloomberg that the central bank would maintain its restrictive monetary policy until 2024. This is crucial to achieve a target rate of 2%, the official reiterated.

Against this backdrop, the dollar has noticeably appreciated against other major currencies, primarily the yen and the euro. The greenback's strengthening was driven by the latest import and export reports from China. Official data indicates that from January to July, exports from China decreased by 5%, while imports fell by 7.6% year-on-year. Additionally, last month both indicators plunged by 14.5% and 12.4% respectively.

At the start of the week, the greenback managed to stabilize after a moment of weakness. On Tuesday morning, August 8, the EUR/USD pair was trading near 1.0997 before rising quickly to 1.1000 and breaking through it. EUR/USD is expected to hit new record highs and its next target is believed to be the 1.1100 mark.

Today, the market's focus is on significant macroeconomic data from the United States, with analysts expecting a noticeable decrease in inflation in the short term. On Thursday, August 10, the country's Department of Labor will publish these reports. According to preliminary forecasts, consumer prices in America surged by 3.3% year-over-year in July.

The data on US consumer prices will help investors assess the results of the Federal Reserve's prolonged cycle of monetary policy tightening. In addition, inflation is projected to have accelerated over the past month.

Current macro statistics will help forecast the Federal Reserve's next step and partly predict its actions at the September meeting. Meanwhile, the majority of analysts (86.5%) believe that the regulator will maintain the key rate at the current level of 5.25%-5.5%. Other experts assume there might be a slight increase.

Last week, tensions escalated in the global stock market after the deterioration of the American credit rating. Against this backdrop, market participants were seriously afraid of widespread sell-offs, but this did not happen. Moreover, the market managed to avoid the correction that many feared after a 7-month period of growth. As a result, the market found relative stability as traders and investors did not rush to lock in profits and sell securities in their portfolios.

Fitch's recent decision has not negatively affected the US currency rate. According to analysts' observations, the US dollar index (DXY) closed last week with gains, showing a short-term dip. Earlier, in August 2011, S&P Global Ratings downgraded the US credit rating amid problems with the debt ceiling. However, these actions also barely affected the national currency. Moreover, the dollar index closed 2021 with a 7% growth, and during that time, it added over 30%.

According to analysts, in the medium and long-term planning horizons, the greenback will maintain stability. A more positive scenario implies a sustained upward trend of the US dollar against the euro. According to Jane Foley, Head of Currency Market at Rabobank, the dollar is still considered a safe-haven currency "thanks to its massive share in international payments." The currency strategist at Rabobank acknowledges that the greenback may lose its dominant positions over time "but it is unlikely to happen in the next 20, 30, or 40 years."

Many specialists assume that the trajectory of the American currency will largely depend on the Federal Reserve's monetary policy. Besides, USD will continue to gain support thanks to the confident growth of the US economy.

 

The global economy is slowing down, risk appetite is decreasing, and the USS is experiencing increased demand. Overview of USD, CAD, JPY

Activity in the currency market remains subdued in the absence of significant economic reports, with the main focus on the US inflation report on Thursday, which could lead to more pronounced movements.

Risk assets are still under pressure due to weak data from China, indicating a decline in global demand. Following Tuesday's disappointing external trade data, it was revealed that China's economy has slipped into deflation, with inflation turning negative at -0.3% YoY in July. Consumer prices rarely decrease in China, and given that other countries continue to grapple with high inflation, this is a worrying sign for the global economy as a whole.

The US dollar remains the leader in the currency market, playing the role of the primary safe-haven currency in the current conditions.

USD/CAD
The Canadian dollar has received several sensitive blows and lost its positive momentum against the USD. The labor market report for July showed a decrease in the number of new jobs (-6.4K), while an increase of 21.1K was forecasted, which is particularly noticeable against the backdrop of strong growth in June (+59.9K).

The unemployment rate rose from 5.4% to 5.5%, and more importantly, the average wage growth increased from 3.9% YoY to 5% YoY. Wage growth is usually a bullish factor as it fuels high inflation, but with simultaneous economic slowdown, this factor begins to work against it.

The Ivey Purchasing Managers Index (PMI) for July dipped into contraction territory, hitting a multi-month low of 48.6 points. This indicates an economic slowdown. However, the price sub-index rose to a 5-month high, increasing from 60.6 points to 65.1 points.

The Canadian economy has suddenly lost the advantage that allowed for expectations of sustainable CAD growth. Inflation remains strong, and to contain it, it is logical to anticipate further actions by the Bank of Canada. These expectations are in favor of CAD strengthening. However, simultaneously, a slowdown in activity with further tightening of monetary policy could lead Canada's economy into a recession. This, on the contrary, limits the resolve of the Bank of Canada.

The unstable equilibrium deprives the Canadian currency of its advantage, weakening the bullish momentum.

The net long position on CAD has increased slightly over the reporting week, with positioning being neutral. However, the calculated price after the release of the disappointing employment report turned upwards and moved above the long-term average.

The sharp upward turn in the calculated price reduces the chances of a confident resumption of USD/CAD decline. Currently, the pair is trading near the middle of a corrective bearish channel. If no additional arguments arise from the Canadian side, the likelihood of further growth will remain high. The long-term target is the upper band of the channel at 1.3690/3720, with support at 1.3350/70.

USD/JPY
The key question that will determine the fate of the Japanese yen remains how resolutely the Bank of Japan is prepared to act in order to reduce domestic inflation. Alternatively, the Bank might continue adopting a wait-and-see position, resorting to adjustments to the current monetary policy.

Possible hawkish steps by the BOJ involve two potential actions - either a complete abandonment of the yield curve control (YCC) policy or a withdrawal from negative interest rates. Any actions in this direction will be interpreted by the market as a hawkish signal, leading to yen strengthening. Conversely, maintaining the current policy will inevitably contribute to further yen weakening.

The recent comments from BOJ officials after the July 28 meeting are cautious and do not provide grounds to expect any decisive steps. For example, BOJ Deputy Chief Uchida Shinichi stated at a press conference that the Bank is "considering an exit from monetary easing but does not see reasons for any actions in the foreseeable future," and that the decision is still "far off."

In other words, the "wait and see" policy remains in place. The yen can start to strengthen under current conditions only if negative trends in the global economy intensify, leading to a noticeable increase in demand for safe-haven assets. As long as there is no reason for such a scenario, there is no reason for yen strengthening.

The net short position on the yen has slightly increased over the reporting week and solidified just above -7 billion, speculative positioning is confidently bearish. The calculated price is above the long-term average and aimed at continuation of growth.

The development of the upward movement for USD/JPY is still the main scenario, despite attempts at consolidation near the 143 level. A week ago, we identified the local high at 145.06 as the target for bullish momentum development and the upper band of the channel at 147.30/70 as the long-term target. These targets remain relevant and can only be adjusted in case of truly significant changes from the BOJ in its monetary policy. As long as changes are cosmetic, the dollar is objectively stronger in this pair.

 

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The most interesting events this week

The previous trading week was filled with important events and reports. When looking at the range and movements of both instruments, one might wonder: why was it so subdued? It was reasonable to expect stronger movements and market reactions. To briefly recap, key reports from the United States turned out weaker than market expectations. Even the stronger ones left a peculiar impression. GDP grew by 2.1% in the second quarter, not the expected 2.4%. The ADP report showed fewer new jobs than expected. Nonfarm Payrolls reported more jobs, but the previous month's figure was revised downward. The ISM Manufacturing Index increased but remained below the 50.0 mark. The unemployment rate rose to 3.8%, which few had anticipated.

Based on all these reports, one might have assumed that it was time to build a corrective upward wave, but on Thursday and Friday, the market raised demand for the US dollar, so both instruments ended the week near their recent lows. So what can we expect this week?

On Monday, the most interesting event will be European Central Bank President Christine Lagarde's speech.

On Tuesday, another speech by Lagarde, as well as Services PMIs of the European Union, Germany, and the United Kingdom. We can also expect speeches by other members of the ECB Governing Council. I advise you to monitor the information related to Lagarde's speeches. If she softens her stance, it can have a negative impact on the euro's positions.

Wednesday will begin with a report on retail trade in the EU and end with the US ISM Services PMI. We can consider the ISM report as the main item of the week, although the ISM Manufacturing PMI that was released on Friday did not stir much market reaction. It is likely that the index will remain above the 52.7 mark, which is unlikely to trigger a market reaction.

On Thursday, you should pay attention to the final estimate of GDP in the second quarter for the European Union. If it comes in below 0.3% quarter-on-quarter, the market may reduce demand for the euro. The US will release its weekly report on initial jobless claims. On Friday, Germany will publish its inflation report for August, and that's about it. There are hardly any important events and reports this week.

Based on the conducted analysis, I came to the conclusion that the upward wave pattern is complete. I still believe that targets in the 1.0500-1.0600 range are feasible, and I recommend selling the instrument with these targets in mind. I will continue to sell the instrument with targets located near the levels of 1.0637 and 1.0483. A successful attempt to break through the 1.0788 level will indicate the market's readiness to sell further, and then we can expect the aforementioned targets, which I have been talking about for several weeks and months.

 

The euro could be heading down for a long time

The euro kicked off the new week with some negative traction. In previous articles, I've already drawn your attention to the statements of some members of the European Central Bank's Governing Council, which boiled down to a simple idea – the hawkish rhetoric is fading, and the ECB is preparing to conclude the process of tightening monetary policy. Thus, the decrease in demand for the euro is quite natural.

On Monday, ECB President Christine Lagarde refused to answer questions about the rate at the September meeting. Some of her colleagues actively hinted that rates should be kept at peak levels for as long as possible but didn't mention new rate hikes. On Wednesday, Peter Kazimir said that interest rates could rise by another 25 basis points. This could happen as early as next week, although a pause in September with a subsequent increase in October or December is also possible.

In my opinion, it doesn't matter when exactly the ECB will raise rates for the last time. The key point is that until the tightening process is complete, there is at most one more hike. Right now, it's not even important how high inflation is in the European Union and how quickly it is decreasing because rates have been the priority for the market over the past year. Since the ECB may raise rates for the last time and the Federal Reserve may raise rates for the last time, it may seem that the euro and the dollar are in similar conditions. However, this is not the case. First, the sentiment suggests a decline. Second, the US currency has been falling for quite a while, and during this period, the Fed has been more aggressive than the ECB. This implies that the euro is a bit more expensive than it should be. I believe that most factors currently favor further depreciation.

I would also like to note another statement from another member of the ECB's Governing Council, Francois Villeroy de Galhau, who stated that interest rates are near their peak, echoing Kazimir's rhetoric. Villeroy also noted that there is currently no recession, and inflation will not slow down to 2% until at least 2025. This implies that the central bank will not further tighten its policy to avoid causing a recession in the European economy, and they can afford to wait on inflation.

Based on the conducted analysis, I came to the conclusion that the upward wave pattern is complete. I still believe that targets in the 1.0500-1.0600 range are quite feasible. Therefore, I will continue to sell the instrument with targets located near the levels of 1.0636 and 1.0483. A successful attempt to break through the 1.0788 level will indicate the market's readiness to sell further, and then we can expect to reach the targets I've been discussing for several weeks and months.

The wave pattern of the GBP/USD pair suggests a decline within the downtrend. There is a risk of completing the current downward wave if it is d, and not wave 1. In this case, the construction of wave 5 might begin from the current marks. But in my opinion, we are currently witnessing the construction of the first wave of a new segment. Therefore, the most that we can expect from this is the construction of wave "2" or "b". I still recommend selling with targets located near the level of 1.2442, which corresponds to 100.0% according to Fibonacci.

 

Trading Signal for GOLD (XAU/USD) on September 12-13, 2023: buy above $1,919 (3/8 Murray - 21 SMA)

Early in the European session, gold (XAU/USD) is trading around 1,923.19, above the 3/8 Murray, and above the 21 SMA. On the 4-hour chart, we see that gold is consolidating within a bullish trend channel formed since August 6.

If theinstrument remains above 1,919 in the next few hours, we could expect it to continue rising and the price could reach the top of this channel around 1,930.

According to the 4-hour chart, the bears are gaining strength in the short term, but overall, XAU/USD remains consolidated around 1,920 - 1,930. XAU/USD is above the daily pivot point which gives it a positive outlook. The key level is 1,923, above which gold is expected to continue rising to 1,930 and up to 1,953 (5/8 Murray).

In case gold trades below 1,919, a bearish acceleration is expected to occur, but for this, we should wait for confirmation below 1,915, which could be seen as a signal to sell with the first target of 2/8 Murray at 1,906. The price could even reach the psychological level of 1,900.

Meanwhile, gold might produce a positive signal if it manages to settle above 1,920. Then, there will be an opportunity to buy with targets at 1,930, 1,937, and 1,953.

The eagle indicator is giving a positive signal. However, if the gold price falls below 1,915, we should avoid buying. If this scenario does not occur at the current price levels, we could buy with the target at 1,953 in the short term.

 

EUR/USD: The euro falls after hawkish ECB surprise

The European Central Bank surprised market participants by raising interest rates by 25 basis points. We must pay tribute to the ECB – it hasn't forgotten how to surprise! Although such unexpected moves, typical of, say, the Reserve Bank of New Zealand, are not characteristic of the ECB – they indicate a weak level of communication. Some hints of hawkishness were heard from certain representatives of the Bank (for example, Klaas Knot suggested not underestimating the potential for a hawkish scenario), but overall, the market was largely expecting a different outcome. The probability of maintaining the status quo was estimated at around 60-70%, and this confidence was also shaped by cautious/dovish statements from ECB members. Weak PMIs, ZEW, IFO, a contradictory report on inflation growth in the eurozone, weak retail sales, a decline in industrial output, and a slowdown in the Chinese economy – all these factors also spoke in favor of a wait-and-see stance. Therefore, the ECB's decision is one that goes "against the grain."

However, the determination (in the current circumstances, it can even be called boldness) of ECB members did not help the single currency. Ironically, the unexpected hawkish surprise from the ECB sent EUR/USD plunging. Reacting to the results of the September meeting, the pair hit nearly a 4-month low, marking it at 1.0650 (the lower Bollinger Bands line on the daily chart).

So, what is the reason for such an anomalous market reaction at first glance? The devil, as always, is in the details. The ECB raised interest rates by 25 bps with one hand but effectively put an end to the current cycle of monetary policy tightening with the other. The central bank signaled that interest rates have "reached a level that will make a substantial contribution to containing inflation." Such wording is difficult to interpret, so EUR/USD traders viewed the ECB's decision as the "final chord" of the current cycle.

Interestingly, ECB President Christine Lagarde tried to soften the message during the final press conference, stating that "it is not possible to definitively say that ECB rates have reached their peak at this time." However, judging by the EUR/USD reaction, market participants have already drawn conclusions about the prospects for further monetary tightening.

It is important to note again that most ECB officials were cautious or dovish in the run-up to the September meeting, pointing out signs of economic slowdown (especially after the release of PMIs), cooling labor markets, slowing inflation (particularly core HICP), and a slowdown in bank lending. Thus, they hinted at the need to maintain the status quo. However, after the September meeting, it became clear that inflation, which is still at a high level, worries ECB officials more than the deteriorating economic outlook.

The latest inflation report reflected the "stubbornness" of European inflation. The Consumer Price Index remained unchanged at 5.3% in August (against expectations of a decline to 5.1%). This gauge has been steadily declining since October 2022, moving from its peak of 10.6% to the current target of 5.3%. However, the downtrend has recently stalled. As for core inflation, the situation is somewhat different. Core HICP, excluding energy and food prices, rose actively until March, reaching 5.7%. Then, the gauge gradually lost momentum but remained within a range: it was at 5.3% in May, 5.5% in June and July, and finally, in August, the index returned to 5.3%.

This report was published two weeks ago on August 31st. Since then, discussions in the expert community about the ECB's future actions have not subsided. After a series of disappointing economic reports (as listed above), hawkish expectations diminished, and the balance tipped in favor of a wait-and-see stance. However, as we can see, the ECB decided to "squeeze" inflation without considering the fragile economic growth in the eurozone.

At the same time, the ECB weakened the euro with its "conclusive" rhetoric. In particular, it was stated that interest rates are already at a level that will be maintained "for a sufficiently long time." According to the ECB, this will significantly contribute to reducing inflation. The central bank hinted that another round of monetary tightening within the current cycle is possible, but such a step would be of an extraordinary nature. This rhetoric did not sit well with the euro, particularly with EUR/USD buyers, resulting in the pair remaining below the 1.06 level.

From a technical perspective, the bears reached the support level at 1.0650, which corresponds to the lower Bollinger Bands line on the daily chart but failed to break through it. Therefore, selling appears risky right now, as you may "catch a price bottom." Short positions should be considered once the pair breaks through 1.0650 (in which case the bearish target will be around 1.0600) or during bullish corrections. In the latter case, the target would be 1.0650.

 

EUR/USD: Short-term rise and bearish outlook. Markets eye Fed meeting

Traders are showing a renewed appetite for the euro at the start of this week. However, it is essential to remain cautious. The trend remains bearish, and the eurozone calendar remains almost empty. The US dollar is under the spotlight this week. Meanwhile, some predict another US dollar rally.

What to expect from EUR/USD this week?

The euro will likely face pressure against the greenback in the coming weeks, especially after dipping below a critical level last week. With no new data from the eurozone, the Fed's upcoming rate decision might not add to this pressure and could even boost the pair's quotes. Everything hinges on the message from the US regulator.

The following trading sessions will be tense. The direction for the EUR/USD pair remains unclear, even if some think otherwise. As we know, markets can quickly shift their sentiment.

Following the European Central Bank's (ECB) recent decision on interest rates, the euro began to decline. The decision confirmed rates would remain steady for the foreseeable future, signaling a pause in rate hikes.

The euro hovered near 1.0675, the lowest level since March 2023.

There were initial attempts for a euro rally after the ECB decided to hike rates by 25 basis points, peaking at 1.0729, but these efforts did not bear fruit. This could lead to a test of this year's range between 1.0500 and 1.1000.

Markets expect the ECB to tighten its policy by approximately 11 basis points and cut by 25 basis points in July 2024. This could pressure the euro, especially if followed by a soft review.

The current instability of the EUR/USD pair suggests a stronger dollar position, especially after falling below the 200-day moving average on the daily chart.

Analysts at Societe Generale say that this looks ominous.

Upcoming economic data is anticipated to show a slowdown, implying a downturn in the eurozone due to high interest rates. This economic slowdown will work against the euro.

The euro might remain at risk until economic growth in the eurozone starts to rebound.

The only silver lining for the euro or British pound, in a context where growth forecasts drive currency trajectories, is that growth expectations for the UK and eurozone are already bleaker than in the US.

This should help prevent a dramatic drop in the EUR/USD or GBP/USD pairs, but the pound could still reach 1.2000 and the euro could fall below 1.0500 if we do not see any positive economic news in the near future.

Euro Technical Analysis

The EUR/USD pair is bracing for a rebound from the multi week low of 1.0630 that was recorded on Friday.

If the pair breaks the 15 September low of 1.0631, the next targets will be the 15 March low of 1.0516 and then the 6 January 2023 low of 1.0481.

If the pair breaks through the level of 1.0827 (200-day simple moving average), it could encourage a bullish move to 1.0922 and then the August 30 high of 1.0945.

A break above this level could facilitate a test of the psychological level of 1.1000 and the August 10 peak at 1.1064.

Fed meeting

The US central bank is preparing to release its latest decisions and recommendations, which may cause volatility for the US dollar. However, many experts believe that major changes in the Fed's monetary policy are unlikely.

Highlights include

Rate Forecasts: Many economists expect the Fed to keep rates at 5.25-5.50%.

Fed Dot Plot. This chart will show how FOMC members see future interest rate movements. Most members will likely indicate that the current rate level will remain unchanged through the end of 2023.

Risks for the US dollar. If the dot plot shows that some Fed members are considering a rate cut in 2024, it could put pressure on the dollar.

Fed Summer Indicators. Two CPI inflation reports are expected to be close to consensus. These data, along with other economic indicators, will confirm that the current level of interest rates is likely adequate to stabilize inflation.

Based on these projections and analysis, the Fed's decisions may confirm the current trend in monetary policy and, as a result, the resilience of the dollar in global markets.

US Dollar Technical Analysis

The US dollar index is near its 2023 high of 105.88. Short-term support and resistance levels are located at 104.44 and 105.88 respectively. The long term support level is marked at 103.04.

Bullish Scenario. If the DXY closes above 105.88 during the week, it could signal further dollar strength in the medium term.

Bearish Scenario. If the index reverses and breaches the level of 104.44, it could signal a significant decline to 103.04.

Economic Outlook. Despite the current difficulties, the US dollar continues to attract investors due to high interest rates, especially compared to the economic situation in Europe and elsewhere.

 

Trading Signals for GOLD (XAU/USD) for October 20-23, 2023: sell below $1,980 (21 SMA - double top)

Early in the European session, gold is trading around 1,977.41, above the 21 SMA, and below the 8/8 Murray. Gold reached a new high around 1,982.12 and is showing indecision which is likely to trigger a strong technical correction in the coming hours.

Since October 4, gold has been trading within an uptrend channel and has now reached the top of this channel, which means that a technical correction could occur in the next few hours with the target in the area of 1,944 (21 SMA).

Yesterday, during a speech by the Fed Chairman, expectations were generated that the Fed would not raise interest rates anymore. This fueled the demand for gold as a safe haven asset reaching a new high.

As investors do not expect any further interest rate hikes this year, gold could continue to rise. However, we should expect a technical correction to occur as long as gold trades below the psychological level of $2,000.

A good level to buy could be around 1,944 (21SMA) or around 6/8 Murray at 1,937. Both levels could give us the opportunity to buy again with goals at the psychological level of $2,000.

On the other hand, if XAU/USD continues to rise and reaches the 8/8 Murray level around $2,000 in the next few hours, it could face strong rejection. This 8/8 area acts as strong resistance and a key level. We could use the pullback to sell below this area with the target at 1,937.

The eagle indicator once again reached the extremely overbought zone. So, we expect a technical correction to occur in the next few hours. Hence, our strategy could be to sell below 1,980 with targets at 1,962 and 1,944.

 

Inflationary explosion in the US: how do the dollar and bonds react?

The consequences of high inflation are felt across the financial market. Specifically, the main Wall Street indices reacted to this news with a decrease after the publication of data indicating a higher than expected rise in consumer prices. This event pressured the expectations regarding the imminent lowering of interest rates, which in turn led to an increase in the yield of US Treasury bonds.

Among other things, the Dow Jones Industrial Average recorded its most significant drop in almost 11 months after the US Department of Labor's report showed an unexpected increase in consumer prices in January, especially due to the rise in housing costs.

Against this backdrop, market indices, which were on the rise in anticipation that the Federal Reserve System (FRS) would begin to lower rates as early as May, showed negative dynamics. The S&P 500 index, for example, closed above the 5000 point mark for the first time, and the Dow Jones index traded near record-high values. However, the publication of inflation data revised expectations regarding the FRS's policy, increasing the likelihood that rate cuts may not occur until June.

Mega-cap companies sensitive to rates, such as Microsoft, Alphabet, Amazon.com, and Meta Platforms, showed a decrease in stock prices amid the rise in yields of US Treasury bonds to a two-month high. A similar situation was observed among chip manufacturers, including Micron Technology, Qualcomm, and Broadcom, which led to a 2% drop in the Philadelphia SE Semiconductor index.

The real estate, consumer discretionary, and utilities sectors faced the most significant losses among the 11 major industry indices of the S&P 500, especially real estate, which reached its lowest values in more than two months.

Small-cap companies also felt the pressure, with the Russell 2000 index showing the most significant daily drop since June 2022.

"Various statements by Federal Reserve System officials in recent weeks have indicated that the market-anticipated rate cuts in the first half of the year might have been premature. The latest consumer price index data certainly confirms this trend," commented Bob Elliott from Unlimited Funds.

The consumer inflation data followed a modest revision of inflation figures for the last quarter of 2023, giving investors temporary relief regarding inflation expectations.

The Cboe Volatility Index reached its highest level since November, highlighting the growing market concern. The S&P 500 and Nasdaq Composite indices lost 1.37% and 1.79% respectively, while the Dow Jones Industrial Average fell by 1.36%, marking its most significant decline since March 2023.

Among other developments, JetBlue Airways shares surged by 21.6% after Carl Icahn disclosed his stake in the company, calling the shares "undervalued." Arista Networks' shares declined by 5.5% following a gross profit forecast below expectations, and Marriott International lost value after forecasting annual earnings below analyst expectations.

Cadence Design Systems and toy manufacturer Hasbro also faced a drop in share value after publishing gloomy forecasts. Meanwhile, Tripadvisor shares jumped by 13.8% following the announcement of the creation of a special committee to review deal proposals.

The total trading volume on US exchanges reached 12.9 billion shares, comparable to the average of the last 20 sessions at 11.71 billion shares.

The US stock market continues to demonstrate record levels, supported by leading technology companies and expectations of Federal Reserve rate cuts. The global stock index MSCI and the Stoxx 600 European index also showed a decline amid current events.

The dollar index reached a three-month high, and bitcoin set a new record since December 2021, despite subsequent declines.

Data on US retail sales and the producer price report are expected shortly, which may further influence market sentiments.

The rise in oil prices continues amid tensions in the Middle East and Eastern Europe, with Brent crude futures and West Texas Intermediate showing significant increases. Meanwhile, gold prices fell below the key level of $2000 per ounce after the CPI data was released, reaching a two-month low.