News & Analysis

US Stocks give up gains on cool CPI as Fed minutes stoke recession fears

13 April 2023 By Lachlan Meakin


Major US stock indices slid in Wednesday’s session after a cooler than expected CPI figure gave them a boost only run out of steam and ultimately finish in the red after Fed minutes stoked recession fears. The Dow outperformed it’s peers, down around 38 points as investors continued to favour defensive stocks over more risk sensitive growth stocks after Fed minutes showed that some members expect a “mild” recession later this year due to the banking crisis.

There was a market-wide dovish reaction to the US CPI coming in softer than expected (5.0% Y/Y vs exp. 5.2%) , seeing stocks rally strongly, this move up was faded later in the session on hawkish remarks from various Fed members that re-iterated that despite a recent cooling the Fed “had some work to do” to bring US inflation back into the target range. Federal Reserve minutes released late in the session stoked recession fears and put more pressure on risk assets.


The USD tumbled after the CPI figure with the Dollar Index crashing through its short term support levels, hitting lows of 101.44 before finding some support at the April lows set earlier in the month.

The Yen was supported by a weaker dollar and CPI induced lower US bond yields with the USDJPY being held at its resistance level of 133.85, before tumbling briefly to a 132 handle before finding some support as the USD recovered slightly on hawkish Fed speak later in the session.

The Euro was also supported by the CPI induced USD sellof, but was further bolstered by comments from ECB member Villeroy, who was hawkish on inflation and Holzman who said the inflation outlook argues for another 50bps in May. This saw the EURUSD breakthrough it’s April highs, touching on 1.10 which is its highest level since February.


Crude oil surged higher, with USOUSD breaking through the top of the range set since the surprise OPEC+ cuts a couple of weeks ago. Soft CPI data and a weaker USD being the main drivers.

Gold was also helped by a weaker USD and also lower bond yields, with XAUUSD looking to test the April highs before retracing somewhat, settling around 2015 USD an ounce.

Todays economic releases see another busy session in the US with more inflation figures in the PPI reading, unemployment claims which will be interesting after Fridays beat on the NFP.

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