US CPI SURPREENDE: Inflation Drops to 2.4% (Under the Expected) – The Green Signal for Fed Connect Printer?

[Igor Pereira]

Traders, the most anticipated number of the month came out and came out cold.

The US Consumer Price Index (CPI) came below expectations, signaling that inflation is cooling faster than Wall Street predicted.

For the market, this has only one translation: The Fed (Federal Reserve) just lost its excuse to keep interest high. The door to aggressive interest cuts (and dollar devaluation) is wide open.

By Igor Pereira Financial Market Analyst

Below is the data and trading strategy for Gold and Dollar.

The consensus expected stubborn inflation, but the data showed weakness.

• Annual CPI (YoY): It came in +2.4% (Expected: +2.5% / Previous: +2.7%). Inflation is collapsing towards the 2% target.

• CPI Monthly (MoM): It just went up +0.2 % (Expected: +0.3 %). The short-term price pressure is fading.

• Core (CPI Core): Fed's favorite indicator (excluding food and energy) fell to +2.5% (Previous: +2.6%).

ExpertFX Reading: The economy is slowing down. Inflation of 2.4% with high nominal interest means that Real Interest They're very restrictive. The Fed is "squeezing too hard" and now you'll have to run behind the curve to cut rates and avoid a deflationary recession.

Remember our DXY technical analysis last night, losing support for 20 years? This fundamental data is the catalyst That was missing.

• The Reaction: DXY must be under strong selling pressure today. With inflation falling, income from the Treasury Securities (Yields) drops, making the Dollar less attractive.

• Target: Wait for DXY to test new minimums while the market pricing interest cuts already for the next meeting.

If the Dollar falls and the interest (Yields) falls, the Gold flies.

• Correlation: Gold's greatest enemy is the real high interest. With the lower CPI, the narrative of "Higher Interests for Longer" (Higher for Longer) officially died today.

• Scene: This validates the thesis that Metals are the protection against the next phase: a Reflation. The Fed's gonna cut interest, the Dollar's gonna fall, and the Gold's gonna refurbish that liquidity in the medium to long term;

The road is clear for the Fed Pivot.

My Vision: Make no mistake: inflation falling now is no sign of economic health, it is a sign of deceleration of demand.

1. Immediate Action: The bias is from Sale in USD (dollar) and Buy in XAU (Gold) and Indexes -> short term Daily CONSOLIDATION;

2. The Danger: The market will celebrate today, but remember: when the Fed cuts interest because of weak economy, the recession usually comes soon after. Enjoy the rally, but keep them Stops Adjusted.

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