The fall in oil prices lowers inflation expectations

Yesterday, the Nasdaq Composite Index recorded its best daily session since mid-November 2023. The benchmark grew by 2,2%. He fared slightly worse SP500, here there was an increase of 1,4%. The Dow Jones ended the day on a positive but moderate note, gaining 0,6%.

The EUR/USD rate approached 1,0980, but at the end of the day the rate was again around 1,0950. In turn, the yields of American bonds at one point fell below 4,32%. Crude oil was losing heavily, dropping its value by over 4%.

Risk appetite

There was a relatively high risk appetite on Wall Street yesterday. Investors are waiting for Thursday's US inflation data and want to get it greater clarity on the further path of interest rate cuts by the Fed in 2024. Currently, Fed Fund futures are valued at approximately 58%. chances of a rate cut of 25 basis points in March compared to nearly 70 percent. last Friday.

The mood was supported to some extent by yesterday's words of Raphael Bostic from the Fed branch in Atlanta. He stated that inflation it fell more than he expected. To avoid the tone of these words being too dovish, the representative of the American institution added that it is too early to consider that the fight against inflation is over. Bostic simultaneously pointed at two possible reductions in the second half of this year. The sentiment could have been additionally supported by Michelle Bowman, who said that it would soon be appropriate to start the process of reducing interest rates.

Oil falls

She lost a lot yesterday Petroleum (WTI -4,12%), which was the result of Sunday's decision by Saudi Aramco (the state oil company) to reduce the prices of Arab Light crude oil for Asian customers in February to the lowest level in 27 months. The WTI variety hit a low below USD 70,5 and Brent just below USD 75,5. Thus, 1-year inflation swaps in the US dropped below the level of 2%. In turn, consumers' 1-year inflation expectations, collected by the New York branch of the Fed, decreased to the lowest level in three years. This represents a decline of almost half a percentage point since November last year.

Source: Łukasz Zembik, OANDA TMS Brokers