The risk sentiment has been negative since the beginning of the year, as central banks reversed their policy and started raising interest rates pretty fast, as inflation surged higher to multi-decade highs. They haven’t had any impact on prices, although it seems that last month prices started to slow down by themselves, as major multinational corporations filled their pockets during Q2.

Central banks have started to call victory on inflation already and as a result, risk sentiment has started to improve. Yesterday the US CPI inflation fell flat for the month, while the annualized CPI (consumer price index) came below expectations, despite another increase last month.

S&P500 H4 Chart – Pushing Above MAs

We have seen two bullish gaps in the last two days

Today’s PPI (producer price index) posted a 0.5% decline in July on a monthly basis, while PPI YoY cooled off to 9.8% from 11.3% in June. So, prices may have reached a plateau but inflation still remains high nonetheless. Stock markets have resumed the bullish trend in the last two days after inflation reports cooled some of the nerves and S&P500 has decisively moved above the moving averages.

US July PPI Inflation Report

• July PPI YoY final demand +9.8% vs +10.4% expected
• June PPI was +11.3%
• PPI MoM -0.5% vs +0.2% expected
• June PPI MoM reading was +1.1%
• Core PPI YoY ex-food and energy +7.6% vs +7.6% expected
• Core PPI MoM ex-food and energy +0.2% vs +0.4% expected

This is the cherry-on-top after yesterday’s CPI data. It adds to the belief that inflation has peaked. The question now is whether it will fall back to 2% at this time next year or 4%. The US dollar is at the lows of the day after the data, breaking yesterday’s lows on most fronts. USD/JPY went down more than 100 pips to 131.70s. Although, these are just the first signs, so the decline has stalled for the moment and the USD is recuperating while risk assets are reversing lower.

US S&P500 Stock Index Live Chart

S&P500