U.S. inflation remains very high | 07 October 2022

#WTI:

OPEC+ will hold its meeting on Oct. 5 in person in Vienna, an OPEC source told. OPEC+, which combines OPEC countries with allies such as Russia, is meeting against a backdrop of falling prices from multi-year highs hit in March and severe market volatility. The talks on an oil output cut are focussing on a potential reduction of 500,000 barrels per day to 1 million bpd to support the market. The latest comments suggest that key OPEC members have started communicating over the matter. Russia could suggest a cut of up to 1 million bpd, while an OPEC source put the likely figure closer to 500,000 bpd. Talks are expected to continue ahead of the meeting. This is a positive signal for the oil market.

Trading recommendation: Buy 79.70 and take profit 83.50.

#SP500:

U.S. inflation remains “very high” and could continue to shock as the Federal Reserve works on subduing the worst price pressures in four decades for Americans, Fed Vice Chair Lael Brainard said. "Monetary policy will need to be restrictive for some time to have confidence that inflation is moving back to target," Brainard added. To fight inflation, the Fed has raised interest rates by 300 points this year, from an original base of just 25 points in February. The central bank’s chairman Jerome Powell said last week that U.S. rate hikes will have some way to go before the Fed considers a pause or reduction, with the likelihood of another 125 basis points being added before the end of the year. This is a negative signal for the stock market.

Trading recommendation: Sell 3636 and take profit 3550.

XAUUSD:

Gold’s four-day rebound reached a climax Friday when the spot price hit a one-week high of $1,675 after data showing another surprisingly higher U.S. inflation print for August that reinforced expectations for more super-sized Federal Reserve rate hikes. Gold is often seen as a store of value and a hedge against inflation and Fed rate increases. Risk assets came under pressure on Friday after latest data showed the Fed’s preferred inflation indicator, the Personal Consumption Expenditures Index, grew 6.2% during the year to August, versus 6.3% in the 12 months to July. Inflation expectations matter and things are starting to look better for gold.

Trading recommendation: buy 1630 and take profit 1660.