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u.S Consumer confidence

The Dollar and Gold Move as Consumer Prices Rise Beyond Expectations, FTSE 100 Closes Higher & Oil Prices Fall for the First Time This Week

U.S. Consumer prices surpass expectations

Gold, the Dollar amongst other markets were volatile on Wednesday, as consumer prices in the U.S. rose above expectations.

Data from the Labor Department showed that its consumer price index rose by 0.4% in September, compared expectations for a 0.3% increase.

The biggest contributor to rise was attributed to food prices, which rose 0.9%, and was up 0.5% from the month prior.

This was the largest increase in food prices since April 2020, during the peak of the pandemic, and came as the cost of meats rose.

Gold hit an intraday high of $1,796, after trading at a low of $1.750 in yesterday’s session. EURUSD also rallied to a high of 1.1509, its highest point this week.

💡 Inflation’s relationship with currency markets
The rate of inflation in a country can have a major impact on the value of the country’s currency and the rates of foreign exchange it has with the currencies of other nations.

Inflation is closely related to interest rates, which can influence exchange rates.  Low interest rates spur consumer spending and economic growth, and generally positive influences on currency value. If consumer spending increases to the point where demand exceeds supply, inflation may ensue, which is not necessarily a bad outcome. The most powerful determiner of value and the exchange rate of a nation’s currency is the perceived desirability of that currency.

FTSE 100 closes higher, on UK GDP data

In the United Kingdom, data today showed that the country’s economy grew in August, sending the FTSE 100 higher in the process.

The Office for National Statistics showed that Britain’s Gross Domestic Product grew by 0.4%, after contracting by 0.1% in July.

💡 What’s to come for UK’s GDP data?
Economists see the figures as better than expected, but also as a sign that the growth is slowing for the foreseeable future after an initial post-lockdown burst. The U.K. economy is going into a “lower gear,” said Dutch bank ING. “It’s still likely to take until early next year before economic activity hits pre-virus levels.”

In a statement accompanying the report, the ONS said, “The economy picked up in August as bars, restaurants and festivals benefited from the first full month without COVID-19 restrictions in England”.

Despite today’s data, the county’s economy is still around 5% smaller than it was pre-pandemic.

GBPUSD rose to a high of 1.3650 on the news.

Oil prices lower as OPEC cuts demand outlook

Oil prices were lower for the first time this week, as OPEC announced that it was adjusting its 2021 demand forecast.

On Wednesday, the Organization of the Petroleum Exporting Countries stated that it expects demand to fall to 5.82 million barrels per day for the rest of the year.

This comes after the cartel initially forecasted that demand would be 5.96 million bpd, however revised expectations due to data from previous quarters.

Source: CNBC International TV

Although it’s 2021 outlook has been adjusted, the group maintained its forecast for 2022, expecting demand of 4.2 million bpd for next year.

Prices of WTI fell below $80 per barrel for the first time this week.

“The stock market is filled with individuals who know the price of everything, but the value of nothing.”

– Phillip Fisher

Eliman Dambell

Senior Market Analyst