Nervousness resurfaces on Wall Street following the CPI (published at 2:30 p.m., prices are increasing more than expected) and investors are choosing the greenback as a fallback solution, rather than T-Bonds or the so-called “defensive” values of the S&P500 (apart from Vertex or Humana). The “$-Index” climbs 0.45% towards 98.4 and returns to its levels of May 5.
It is gaining ground in particular against the Euro (0.45% towards 1.1730), against the Swiss Franc (0.55% towards 0.7820) and especially against the Pound (0.7% towards 1.3510), victim of political uncertainties in the United Kingdom, with Keir Starmer on borrowed time.
The pound is losing ground against all currencies, and in particular against the Yuan (-0.75%), which gained 0.05% on the eve of Donald Trump’s state visit to China (the Yuan = $6.7920).
This rise in the greenback weighs on Gold, which falls by -2% (towards 4,665) and silver (-3.5% towards $84.20).
The high point of this session was the publication of the American CPI: unsurprisingly, the rise in oil and its derivatives fuels the rise in consumer prices in the United States.
They accelerated a little more than expected last month, reaching an annual rate of 3.8%, while economists expected a rate of 3.7% after that of 3.3% observed in March.
It would have been much worse if the US and EU were not drawing on their stocks at a rate not seen since…1973.
“Total inflation is at its highest level since May 2023,” underlines Bastien Drut, head of strategy and analysis at CPRAM, explaining that around two thirds of the increase in inflation over the month comes from the “energy” component.
It has now been more than five years that inflation has been above the Fed’s target (29% cumulative, compared to wages which have increased by 26% on average in the United States): there will certainly be a majority of voices within the FOMC – which will be chaired by Kevin Warsh – to demand the abandonment of the “accommodative bias” and possibly a rate increase (31% consensus for at least one increase by the end of 2026).
Core inflation is at its highest since September:
In underlying data (excluding energy and food products), the annual inflation rate stood at 2.8%, returning to its highest level since last September, compared to 2.6% in March, when the consensus was 2.7%.
Sequentially, the rise in consumer prices stood at 0.6% in total data and 0.4% in underlying data in April, the latter figure having been slightly surprising, according to Josh Jamner, at ClearBridge Investments.
“This development brings the acceleration in inflation over two months to 1.5%, its highest level since 2022 and a reading that is among the highest observed since the mid-1970s,” notes this analyst.
The latter notes that the increase in housing costs (0.6%) also contributed to the increase recorded this month, and that the so-called “supercore” CPI, corresponding to services excluding housing in the basic CPI, increased by 0.45% in April.
But over 1 year, many price increases are spectacular:
-energy products (oil, gas): 29.2%
-essence : 28,4 %
-air fares/plane tickets: 20.7% (kerosene 180%)
-energy (distribution/utilities): 17.9%
-électricité : 6,1%
-fruits and vegetables: 6.1%
-hospital services: 5.5%
-réparations automobiles : 5,1%
Given the relative weighted weight of these expenses in the budget of American households, a score of 3.8% over 1 year seems completely insignificant compared to “felt inflation” (but which bites very hard into real purchasing power).
If the Strait of Hormuz were to reopen by mid-June (in the best hypothesis), the price of oil will hardly fall below $90, taking into account 5 million production capacities which have disappeared with the war (not only the one which is in “pause” in the Gulf, but also between Russia and Ukraine, and there, no “pause”), while the United States, Europe, and all the countries of Asia will try, all at the same time, to reconstitute their strategic reserves.
