CPI surpassed expectations and sparked interest rate hikes, and the dollar broke 102, and gold fell below 4000

According to Woofun AI, the US inflation data surpassed expectations and resonated with the Federal Reserve's interest rate hike expectations, driving the US dollar index (DXY) to rise strongly and break through the 102.6 mark. At the same time, international gold prices fell below the psychological defense line of 4,000 US dollars per ounce. Against the backdrop that the Federal Reserve (Fed) may raise the benchmark interest rate, the dollar trend is significantly stronger than other major currencies, while gold, as an interest-free asset, is under tremendous selling pressure.

This shift in the macro landscape has directly reshaped the pricing logic of the global foreign exchange and precious metals markets. Investors' attention is highly focused on the upward pressure on prices revealed by the Consumer Price Index (CPI) and its potential impact on monetary policy.

According to data compiled by Woofun AI, the US dollar index (DXY) rose 0.692 points (0.68% increase) from the previous day on the 11th (local time) and finally closed at 102.605 points, while the previous day's closing price was 101.913 points. During the Asian trading session, the index fluctuated in a narrow range around 102, but momentum was quickly released after entering the US trading session. It broke through the 102.3 mark after 7 a.m. ET, then rose further to the 102.5 mark at around 8 a.m. ET, then fluctuated between 102.5 and 102.6, and remained strong overall. The core variable driving this round of gains was a 0.4% year-on-year increase in the CPI (Consumer Price Index) in October, higher than market expectations of 0.3%.

This data has significantly boosted market bets on the December Federal Reserve Open Market Committee (FOMC) meeting to raise interest rates. Currently, the market believes that the probability of a 0.25 percentage point increase in interest rates in December is about 87%, while the previous scenario where the probability of a 0% increase of 0.50 percentage points has risen to 12.9%.

Furthermore, Fed official Christopher Waller's tough remarks further fueled expectations of austerity and prompted the US Dollar Index (DXY) to rise to its highest level since April last year.

International gold prices fell for two consecutive days due to the double impact of the strengthening of the US dollar and concerns about rising interest rates. The price of gold fell to $3984.950 an ounce on the 11th, down $47.018 from the previous day (down 1.17%), and has fallen below the previous day's closing price of $4031.968. The price of gold briefly exceeded $4,060 at the beginning of trading, but then the selling pressure intensified. Especially during the US trading session, the price fell below the $4,000 mark, and even dropped further to around $3,980 in the afternoon. The price of spot gold rose to an intraday high of $4066.77, but fell 1.1% to $3986.79 at 1:51 p.m. EST. This is another decline after falling about 3% the previous day. US gold futures due in December also fell 0.7% to close at $4000.50. Bob Habkon, chief market strategist at StoneX (SNEX.US), pointed out that the higher-than-expected CPI strengthened the need to raise interest rates in December. As interest rates rose and the dollar strengthened, the attractiveness of investing in gold, which does not generate interest, declined.

On the other side of the foreign exchange market, despite the overall strengthening of the US dollar, the exchange rate of the US dollar against the Korean won fell, and the Korean won showed a relatively strong performance. The exchange rate of the US dollar against the won fell 3.22 won (0.24% decrease) from the previous day to close at 1338.91 won, lower than the previous day's closing price of 1342.13 won. The exchange rate was around 1,342 won at the beginning of trading, then the decline widened. At one point, it fell to around 1,332 won in the intraday period, then rebounded to around 1,338 won due to increased demand for low-price purchases, but it continued to decline.

This divergence is partly due to the suspension of trading in the US Treasury bond market on the same day due to Veterans Day. As a result, 2-year and 10-year treasury bonds were unable to reflect interest rate changes through formal transactions, and the market instead used US dollars and gold prices to price the Federal Reserve's policy. The key variables for future financial markets will focus on how much interest rates were raised in December and whether inflation is slowing down. If the upward pressure on prices continues, the strengthening of the US dollar and the adjustment of gold may continue, but changes in the central bank's demand for gold purchases and risk appetite will jointly determine the final trend.