Inflation in the US rises more than expected in January and complicates the interest rate cuts of the Fed

The most recent figures of the Office of Labor Statistics revealed that the Consumer Price Index (CPI) rose 3% year -on -year in January, an increase with respect to the 2.9% registered in December. Consequently, the operators adjusted their forecast for the next rate cut of the Fed from September to December.

“The markets reacted negatively. Nasdaq, S&P 500 and Small Caps indices falling more than 1%., And bond yield %, “they said from Capital Guardian.

Seasonal factors, such as rising fuel costs and the persistence of inflation in food, contributed to keeping general indices. The CPI advanced 0.5% compared to the previous month, An acceleration compared to the 0.4% increase recorded in December and above the estimate of economists, who projected 0.3%.

In “underlying” terms, which exclude the most volatile costs of food and energy, prices in January increased a monthly 0.4%, above December 0.2%, and 3.3% year -on -year. This represented an increase with respect to 3.2% of December, which had been the first annual slowdown of the underlying CPI since July.

While inflation shows a downward trend, it remains above the objective of 2% of the Federal Reserve.

The arrival of Donald Trump to the Presidency has further complicated the panorama, since some economists warn about a possible inflationary resurgence due to their protectionist commercial policy. This could hinder the path of Fed in decision making about interest rates.

On Monday, President Trump announced the imposition of 25% global tariffs on imports of steel and aluminum, which will come into force on March 12. In addition, the same tariff will be applied to Mexico and Canada next month, while a 10% tax on China has already been implemented.

“Today’s data is not good news for the Fed, since last week unemployment had surprised the decline towards 4.0% and now inflation surprises 3.0%,” they said from Balanz Capital.

“Yesterday, in his testimony in front of the Senate, Powell said that the monetary authority was in a hurry to cut its monetary policy rate, something that today’s data supports. The market now expects only a 25PBs cut in the policy rate Fed monetary only for December.

Interest rates are moving up along the treasure yield curve, with the rate to 2 and 10 years climbing 8.6 and 9.6pbs, respectively, around 4.37% and 4.63%. The futures of the S&P 500 and the Nasdaq operate down with 1%drops.

The market reaction

“The conclusion is clear. The Federal Reserve should not cut. Regardless of the way in which the Fed decides to divide the data (main, basic and extraordinary), all exceeded expectations. Annualized data at 3 and 6 months are also uploading. Although the IPC data at the beginning of the year are known for their seasonality and distortions, the labor market is clearly stable and economic conditions do not justify a relaxation of conditions. Everything indicates that the neutral interest rate should be higher, “he added Dan Silukwallet manager at Janus Henderson.

Uncertainty about tariffs and commercial policy under the administration of Trump remains high and has affected the US dollar in recent days, allowing a slight recovery of risk -related assets at the expense of the dollar index (DXY).

Meanwhile, although the latest Employment Report (Nonfarm Payrolls) showed that the economy added fewer jobs expected in January, it also reflected a fall in the 4.0%unemployment rate, together with stable salary inflation indicators that support the vision of a solid and resistant labor market.

This, combined with persistent inflation and fed cautious posture, should maintain a constructive perspective for the dollar for the moment.

As for the Fed, the market participants now expect the Central Bank to resume its relaxation cycle in June, with another reduction of a quarter -point already discounted.

In relation to the EUR/USD, Pablo Piovano, a senior analyst at FXSTERET, shared his technical perspective. He identified the minimum of February in 1,0209, reached on February 3, as the immediate support level. Losing this level could put a possible fall to the minimum of 2025 in 1,0176 (registered on January 13), before the torque approaches the psychological level of 1,0000.

Uploaded, the resistance is at the maximum of 2025 in 1,0436 (of January 6), also backed by the maximum of December in 1,0629 (of December 6), an area reinforced by the single mobile average of 100 days.

Piovano also pointed out that the bass perspective of the torque should be maintained while negotiating below the 200 -day mobile average in 1,0752.

In addition, the relative force index (RSI) has retreated to the level of 43, indicating a loss of impulse, while the average directional index (ADX), around 18, suggests a weak trend.