• US futures gained on Wednesday with all eyes on the upcoming consumer price index report.
  • The CPI is expected to rise 8.1% in April, down from the 8.5% gain in March, suggesting inflation may have peaked.
  • The data could influence how aggressively the Fed hikes interest rates following its half-point increase last week.

US stock index futures gained on Wednesday ahead of a key read on consumer inflation that could help set investor expectations for the likely path of Federal Reserve monetary policy.

S&P 500 futures gained 1.06%, while Dow Jones futures rose 0.87% and Nasdaq futures climbed 1.20%, suggesting a strong start to trade later in the day. 

Wednesday's consumer price index report, which is due at 08.30am ET, is a closely-monitored gauge of broad inflation in key goods and services.

Economists expect the index to have risen by 8.1% year-over-year in April, compared with March's 8.5% gain, thanks to a decline in the cost of fuel and used cars, in particular, which in turn, could signal inflation in the US has peaked.

Core CPI, which excludes volatile energy and food prices, is expected to have risen 6% year-over-year, down from the 6.5% year-over-year rise in March.

"All eyes today are on the US CPI inflation print," said Neil Wilson, Chief Market Analyst for Markets.com.

The inflation data could influence how aggressively the Federal Reserve raises interest rates. The Fed hiked rates by 50 basis points for the first time in over two decades to control soaring inflation, which surged to 41-year highs in March. The last time the Fed raised interest rates by 50 basis points at a single meeting was in May 2000.

"If the US CPI number shows weakness in its numbers today, that could change the narrative in the market quite significantly because that would mean that the Fed's hawkish stance is close to its peak as well," said Naeem Aslam, Chief Market Analyst at Avatrade.

"If inflation begins to show retracement from its recent high, we are likely to hear a less hawkish narrative from the Fed, which could strengthen the risk-on sentiment among traders."

Futures markets show traders expect half-point increases at the central bank's June and July meetings before returning to 0.25-point hikes in the fall.

May's increase was the second of the Fed's current hiking cycle following the 25 basis point hike in March. The benchmark rate now has an upper limit of 1%, up from the 0.25% limit seen through much of the pandemic.

The dollar eased against other major currencies, falling 0.4% to 105.33. It touched its highest in almost 20 years on Monday, driven by expectations for hefty rate rises from the Fed.

Gold, meanwhile, rose 0.5% to trade around $1,850.50 an ounce, but still hovered close to three-month lows. A stronger dollar, rising bond yields and the prospect of a hawkish Fed have combined to push the price down by 11% from highs above $2,000 back in March.

Read the original article on Business Insider