- US Producer Price Index for April +2.2% y/y vs. +2.2% expected
- Powell: The labor market is as tight as it was before the pandemic in 2019
- US credit card balances rose 13.1% year over year in the first quarter
- Winch from the European Central Bank: Higher interest rates for a longer period of time from the Fed may slow the pace of cuts
- ECB knot: highlights how US pandemic decisions boosted productivity
- Home Depot is seeing declining demand for large projects
- Wild. Biden: China greatly supports products that are dumped in foreign markets
- The Fed's Cook does not comment on monetary policy
- Nasdaq closes at new record high
Markets:
- Gold rose $21 to $2,357
- The price of West Texas Intermediate crude fell $0.78 to $78.34.
- The yield on US 10-year bonds fell by 3.6 basis points to 4.445%.
- The New Zealand dollar advances, and the Japanese yen lags
- The Standard & Poor's 500 rose 0.5%.
The PPI report was an interesting case in that it is a secondary measure of inflation but came a day before the CPI. Since it's also from the Bureau of Labor Statistics, it can provide hints about seasonal adjustments and the trend of the all-important inflation report.
When the headline came in at +0.5% compared to the expected +0.2%, the US dollar rose and the rest of the market rebounded. However, this move was short-lived because the previous month was revised down to -0.1% from +0.2%, leaving the yearly reading at 2.2%. It was a similar story at heart.
It took about 10 minutes for the moves to fade completely, which just confirmed the buy-on-dips mentality in the broader market. Powell reinforced the move with his usual cautious rhetoric and also described the PPI report as “mixed and not hot” due to revisions.
I thought we would see some late-day jitters in risky trades and perhaps some USD buying ahead of the CPI report but we finished near the high end of the day. Part of that may be the meme mania that has taken over stocks with GME and AMC returning for another issue.
In terms of market movements, the forex market has been much less volatile than other markets. Aside from the PPI volatility, it was a day of flat selling for the US dollar with the exception of USD/JPY, which continued to rise.
What if tomorrow's Consumer Price Index (CPI) is the same as the Producer Price Index (PPI)? It's an interesting thing to consider, but with Home Depot and Powell commenting, it's compelling to believe that it's just a matter of time until inflation falls and interest rates fall. Perhaps more worrying is the euphoric mood, at least in the short term.
This article was written by Adam Paton at www.forexlive.com.
