Investors Adjust Positions as Fed's Stance Softens Amid Expected Inflation Levels

• The inflation rate dropped from 3.2% in October to 3.1% in November, aligning with analysts' expectations.

• The U.S. dollar bounced back from its lowest point during the session as bearish traders hurried to decrease their short positions following the release of the report.

• The SP500 retreated from its session highs, but traders were hesitant to make significant moves in anticipation of the Federal Reserve's decision tomorrow.

 On December 12, the U.S. released its inflation reports for November. The Inflation Rate decreased from 3.2% in October to 3.1% in November, while the Core Inflation Rate remained steady at 4%, meeting analysts' expectations.

The inflation data is particularly significant as the Federal Reserve is set to announce its interest rate decision tomorrow. Market expectations lean towards the Fed maintaining the federal funds rate, so traders are mostly attentive to Powell's comments.

Following the release of the inflation reports, the U.S. Dollar Index rose from its session lows. Some traders appeared to anticipate a drop in the Inflation Rate to 3% and a dip in the Core Inflation Rate to 3.9%. When the actual report was released, these traders hurried to close their short positions. Currently, the U.S. Dollar Index is striving to stabilize above the 104.00 level.

Gold retraced towards the $1980 level as traders took notice of the U.S. dollar's recovery. Increasing Treasury yields added to the pressure on gold markets. Looking at the overall market sentiment, it remains bearish after an unsuccessful attempt to settle above the $2100 level.

The S&P 500 retreated from its session highs as traders digested the inflation data. Since inflation did not decrease as rapidly as expected, there are concerns among traders that the Fed may not adopt a dovish stance. However, it's important to highlight that the retreat was not substantial. Currently, the S&P 500 stabilized near the 4615 level. The market sentiment remains positive, and Powell’s press conference stands out as the sole catalyst capable of altering the trend in the short term.