The markets were off to another quiet start, but this turned out to be the calm before the US PPI storm.
Crude oil rose one day into the red while gold and US stocks advanced. Treasury yields and the dollar also closed lower.
Read on to find out how it all happened!
Titles:
- UK claimants change in April: 8.9k (13.9k expected, -2.4k previous), unemployment rate rises from 4.2% to 4.3% as expected
- UK average income index for the three-month period ending March: 5.7% (5.3% expected, previous reading upgraded from 5.6% to 5.7%)
- Swiss PPI April: 0.6% mo (0.2% expected, 0.1% previous)
- Bell, a member of the Bank of England's Monetary Policy Committee, spoke about the possibility of an interest rate cut this summer
- ZEW eurozone economic sentiment index for May: 47.0 (46.1 expected, 43.9 previously)
- German ZEW Economic Sentiment Index for May: 47.1 (44.9 expected, 42.9 previous)
- Canada Wholesale Sales for March: -1.1% MoM (-0.9% expected, +0.2% previously)
- US headline PPI for April: 0.5% m/m (0.3% expected, previous reading reduced from +0.2% to -0.1%)
- US core PPI for April: 0.5% m/m (0.2% expected, previous reading reduced from +0.2% to -0.1%)
- Fed Chair Powell on the latest PPI numbers: “I wouldn't call it hot, I would call it kind of mixed.”
- Australian Wage Price Index Q1 2024: 0.8% q/q (0.9% expected, previous reading upgraded from 0.9% to 1.0%)
Broad market price movement:
Dollar Index, Gold, S&P 500, Oil, 10-Year US Yields, Bitcoin Overlay Chart by TradingView
Little sideways price movement was seen during the Asian and European trading sessions, as traders braced for the release of the US Producer Price Index later in the day.
However, some differences between the price movement of the asset classes were noticeable, with crude oil prices falling and US gold and stock indices actually rising.
Volatility rose when the actual PPI numbers were printed, with headline results for April coming in green but the previous report seeing cuts. Later, Fed Chairman Powell indicated that the numbers were not enough to change his outlook on inflation.
As a result, US dollar and Treasury yields fell, while the S&P 500 continued to rise, the latter likely supported by renewed interest in meme stocks like GME and AMC.
Forex market behavior: US dollar against major currencies
Overlay of the US dollar against major currencies Chart by TradingView
The USD was off to a mostly positive start, with the exception of the NZD which was supported by a 9.1% monthly rise in visitor arrivals in March versus the previous 1.6% rise.
From there, the greenback stayed afloat and then moved sideways during the Asian market hours, before eventually giving up more ground to the New Zealand dollar and then the franc, which was boosted by an upbeat Swiss PPI report.
The pound deviated from the FX pack during the release of UK jobs numbers, which were mostly stronger than expected and generated overall bearish effects for the currency. However, it quickly joined its peers in advancing against the dollar, even as the US producer price index for April beat estimates.
The cuts to the March PPI report and the “strong” reaction from Fed Chair Powell likely contributed to the overall bearish bias in the dollar for the rest of the New York session.
Potential catalysts coming on the economic calendar:
- Surprising change in employment in the Eurozone at 9:00 AM GMT
- Eurozone GDP at 9:00 AM GMT
- US headlines and core CPI at 12:30pm GMT
- Headlines and core US retail sales at 12:30 PM GMT
- US Empire State Manufacturing Index at 12:30 PM GMT
- NAHB US Housing Market Index at 2:00 PM GMT
- EIA crude oil inventories at 2:30pm GMT
- Preliminary Japanese GDP and price index at 11:50 PM GMT
All eyes and ears are on the US CPI report due out later today, which could lead to another round of market consolidation before volatility picks up again when the actual results are seen.
Don't forget that the US Retail Sales report and the Empire State Manufacturing Index are also scheduled to be released, which could lead to additional price hikes, so be sure to check our Event guide for the US CPI for April To know what to expect!
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