US PPI final demand came in lower than expectations. That was the good news. The not-so-good news is that even with the better than expected MoM data, the YoY figures – although lower than expected – still showed YoY at 3.4% for the headline with ex food and energy at 3.5% (unchanged) and ex-food/energy and trade at 3.3% (vs est 3.5%). All are comfortably above levels needed to get the CPI and PCE data down to 2.0% target.
So although better than expected, it is not a “…happy days are here again” scenario.
Tomorrow the US CPI data will be released at 8:30 AM ET with the
- CPI MoM is expected to show a 0.3% gain vs 0.3% last month.
- CPI YoY is expected to come in at 2.9% up from 2.7% last month.
- Core CPI MoM is expected to rise by 0.2% vs 0.3% last month.
- Core CPI YoY is expected at 3.3%, unchanged vs last month.
Again, it is not a “…Green grass and high tides forever” scenario.
The realization from the market is the Fed is on hold. The market is only pricing in 1 cut – and a portion of another – for the rest of the year and to some, that might be stretching it.
Fed’s Goolsbee might be more dovish, and although there may be speculation that data like the PPI points to a taming of inflation, the YoYo data is still above and below 3% – not 2%. That will keep the Fed on hold.
Tomorrow, in addition to the CPI, the:
- Empire manufacturing index January is expected at 3.0% versus 0.20% last month.
- Canada manufacturing sales are expected at 0.5% versus 2.1% last month and
- Canada wholesale trade is expected to be down -0.7% versus 1.0% last month.
The weekly inventory data for oil will also be released with expected to show a drawdown of -0.992M barrels, while gasoline is expected to show a build of 2.034M and distilates are expected to also show a build of 0.785M.
Also of interest may be mortgage application data for the current week with the 30 year mortgage rate moving back above 7%. In
Ahead of the US session, the UK CPI will also be an influence with:
- CPI MoM est 0.4% and YoY est 2.6% vs 2.6% last month
- CPI Core MoM est 0.5% and YoY Core est. 3.4% vs 3.5%
In trading today, the USD was mixed to lower as yields did move lower.
The EURUSD moved up 0.60% on the day and has now strung 2- up days in a row. Technically, the price got a boost after rising back above the falling 100-hour MA at 1.0258. That break took the price to the 200-hour MA at 1.0300 and as head to the close for the day, the price is ticking above that MA as well (at 1.0306). If the momentum can continue, the 38.2% of the move down from December comes in at 1.0349. There is a swing area just ahead of that target between 1.0322 to 1.0343.
The AUDUSD and the NZDUSD pairs heading into the Asian-Paciific session waffled up and down, and although higher, the buyers have more to prove. The Australian Employment data will be released tomorrow night in the US session. Perhaps the market is waiting for a little nudge from that data. For a technical view of those currencies, see the video HERE.
The USDJPY continued to wander up and down in sloppy, non-trend trading. The price of the pair is above the 100 hour MA at 157.469, the 200 hoiur MA at 157.75 and the 100 hour MA at 157.94. If the price can stay above that cluser of MA, the bias is tilted to the upside.
The GBPUSD could not hold gains as the Chancelor of the Exchequer Reeves tried to appease MPs – and the markets – that everthing will be alreight. The price is consolidating at low levels (and lowest levels since November 2023), but remains below the 100 hour MA at 1.2239. It will take a move above that MA – and staying above – to give the buyers more confidence/hope.
A look at other instruments as the day comes to an end:
- Crude oil snapped its 3-day run to the upsde. It is trading down $0.71 or -0.90% at $78
- Gold bounced higher by $15 or 0.57% to $2677
- Bitcoin also gained with a rise of $1800 to $96,348
In the US debt market, yields are marginally lower as the market reacted modestly to the lower PPI after the recent run higher. WIth the 10 year within about 20 basis points of 5%, many see that as a ceiling area given the rate expectations.
- 2-year 4.368%, -3.3 basis points
- 5-year 4.597%,, -2.0 basis points
- 10 year 4.792%, -1.3 basis points
- 30 year 4.976%, -1.0 basis points
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