Investors remain divided ahead of inflation data

Global equities trade in tight ranges near record levels as investors remain divided ahead of Thursday’s US inflation report that could give more clues about the upcoming direction of US monetary policy. Economists are expecting the CPI to rise 4.7% from a year earlier, according to Dow Jones. In April, the CPI increased 4.2% on an annual basis, the fastest rise since 2008. The greenback weakened against its peers with the 10-year Treasury yield two basis points lower at 1.50%. Markets in Europe are lower while Chinese stocks were able to edge slightly higher. US stocks point to a slightly negative NYSE opening. On the data front, job openings in April soared to a new record high, with 9.3 million vacancies coming online amid the economic recovery. WTI oil climbed past $70, while Bitcoin found some stability supported by El Salvador adopting Bitcoin as legal tender.

Investors continue to disagree whether the increased inflation is only temporary or persistent enough to justify a scaling back of the Federal Reserve's stimulus measures. The market is waiting very eagerly for tomorrow's inflation figures, which will provide new impetus. I assume that the Fed will remain dovish and continues to believe that the markets, especially the labor market, need support. High inflation figures would increase the pressure on the Fed and also provide headwinds for the markets. The markets remain mixed with little volatility. Stocks benefiting from the reopening of the economy continue to outperform. In the forex market we see very little movement, with the falling US Treasury yields putting some pressure on the USD. There will be some volatility in CAD with the Bank of Canada interest rate decision (12:30 GMT). I don't expect any changes, but more details on how the BoC will proceed with reducing asset purchases. Rising cases of delta variant coronavirus in the UK could delay plans to reopen businesses, which would put pressure on UK markets and GBP.