U.S. Inflation Rate May Trigger Global Stock Selloff

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The United States’ inflation trend may trigger selloff in global stocks and moderated the price of gold as investors take proactive realignments on expectation of a more hawkish cycle.

Senior Research Analyst, FXTM, Lukman Otunuga, said the US inflation report has remained at uncomfortable levels. The Bureau of Labor Statistics (BLS) reported that headline inflation rose by 50 basis points to 7.5 per cent in January 2022, from 7.0 per cent in December 2021, the highest since 7.6 per cent recorded in February 1982.

According to him, given the widespread obsession with inflation, the CPI report has the potential to rattle financial markets.“Another jump in US consumer price inflation may boost market expectations over a more aggressive hawkish cycle and a possible 50-basis point rate hike in March. This could result in a selloff in global stocks and gold prices, while the dollar appreciates.

Traders are currently pricing in more than five quarter-point Fed rate hikes in 2022 which could result in more pain for stocks and gold down the road,” Otunuga said.

He noted that oil has slipped from multi-year highs as investors weighed the risks to the market’s recent rally.

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