After a dramatic week in the markets following Donald Trump’s significant victory in the U.S. presidential election, investors are now turning their focus to inflation data for clues on potential economic shifts influenced by the election results. Key developments in U.S. inflation, Federal Reserve announcements, Bitcoin’s price surge, and oil trends will shape the market in the coming days. Here’s what to keep an eye on this week.
1. U.S. Inflation Data (CPI)
On Wednesday, all eyes will be on U.S. inflation figures for October as markets watch for signs of whether President-elect Trump’s economic policies could drive inflation higher. Economists forecast that the Consumer Price Index (CPI) will maintain an annual growth rate of 2.4%, mirroring September’s pace—the slowest increase in over three years, which has spurred speculation of further Federal Reserve rate cuts.
However, Trump’s potential plans, such as higher tariffs, could put upward pressure on consumer prices, affecting the Fed’s future decisions. Following last Thursday's 0.25% rate cut, Fed Chair Jerome Powell provided limited insight on the direction of future rate adjustments, adding suspense to the release of inflation data this week.
2. Impact of Inflation on the Stock Market Rally
The stock market, which surged to historic highs last week after Trump’s win, may face a test from this week’s inflation data. The S&P 500 reached a record-breaking 6,000 points on Friday, driven by investor enthusiasm for potential tax cuts and relaxed regulations under the new administration.
The Fed’s recent 0.25% rate cut has boosted market sentiment, but future cuts will depend on whether inflation remains manageable. Positive inflation data could help sustain the rally, while any unexpected uptick could dampen it.
3. Federal Reserve Speeches and Insights
This week, several Federal Reserve officials will be speaking, starting with Governor Christopher Waller on Tuesday. Richmond Fed President Thomas Barkin and Philadelphia Fed President Patrick Harker will also deliver remarks. However, markets will closely monitor officials who speak after the inflation release on Wednesday, including Dallas Fed President Lorrie Logan, St. Louis Fed President Alberto Musalem, and Kansas City Fed President Jeff Schmid.
Fed Chair Jerome Powell’s remarks on Thursday are expected to be particularly influential, with New York Fed President John Williams rounding off the week with a speech about financial markets later the same day.
4. Bitcoin Nears $80,000 Milestone
Bitcoin is approaching the $80,000 mark, fuelled by expectations of more crypto-friendly policies under Trump’s administration. The cryptocurrency reached an all-time high of $79,692 over the weekend and was trading close to that level on Monday morning.
During his campaign, Trump committed to establishing the U.S. as a global crypto leader, proposing a strategic Bitcoin reserve and promising a favourable regulatory environment. His stronger-than-expected election performance, with Republicans holding the Senate and nearly securing the House, has further boosted Bitcoin's rise. Remarks from Fed Chair Powell, affirming that the Fed’s policy path is unaffected by near-term political shifts, also contributed to recent crypto gains.
5. Oil Prices: Struggling to Gain Momentum
Oil prices slipped on Friday, with U.S. crude settling at $70.35 per barrel and Brent crude at $73.87, despite a week-long gain. China's recent stimulus package, aimed at easing debt burdens on local governments, failed to impress energy traders due to its limited impact on demand, leaving deflationary pressures on China’s economy as a persistent drag on oil.
Nevertheless, oil prices closed the week higher amid expectations that sanctions on Iran and Venezuela could tighten supply under the incoming Trump administration. Additionally, the Fed’s recent rate cut is expected to stimulate economic activity and increase energy demand, offering further support to oil prices.
This week is poised to be an eventful one for the markets, with inflation data, Fed speeches, Bitcoin’s trajectory, and oil prices setting the tone for investors. Stay tuned to see how these factors will shape the economic landscape in the days ahead.
Source: (Investing.com, Reuters)
