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PPI Whipsaw Sees USD, JPY Sold

FOREX
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  • A mixed US PPI release underpinned a short spell of volatility in USD pairs, as the higher-than-expected ex-food and energy prints (0.5% vs. Exp. 0.2% M/M, 2.4% vs. Exp. 2.3% Y/Y) triggered USD strength to send EUR/USD, GBP/USD and AUD/USD to new daily lows. This price action swiftly reversed, however, as details in the PPI report showed negative revisions to the March data and few ramifications for PCE.
  • The subsequent USD weakness aided GBP/USD back to the 50-dma resistance at 1.2594, a break above which opens 1.2634 and levels last seen in mid-May.
  • The extended post-PPI reaction worked against JPY, which traded softer against all others in G10. This pressured a trade-weighted JPY index, and a further 0.25% depreciation puts JPY at new May lows, with another ~1.8% sell-off needed to hit pre-intervention cycle lows.
  • This highlights the strength of the EUR/JPY bounce over the past two weeks - with EUR/JPY ~1.4% shy of highs vs. USD/JPY's ~2.3%. A close at current or higher levels would mark seven consecutive sessions of gains in EUR/JPY, the longest winning streak since April of last year - which extended to 10 consecutive trading days.
  • Focus Wednesday shifts to the US CPI print, and in particular any signals for an out-of-consensus view on PCE. Fed market pricing still only fully discounts a first rate cut by the November FOMC decision, on which Powell commented today that policy is likely to be kept tighter for longer. Outside of the US inflation print, appearances from ECB's Rehn, Muller, Villeroy & Makhlouf and Fed's Kashkari & Bowman are due.
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  • A mixed US PPI release underpinned a short spell of volatility in USD pairs, as the higher-than-expected ex-food and energy prints (0.5% vs. Exp. 0.2% M/M, 2.4% vs. Exp. 2.3% Y/Y) triggered USD strength to send EUR/USD, GBP/USD and AUD/USD to new daily lows. This price action swiftly reversed, however, as details in the PPI report showed negative revisions to the March data and few ramifications for PCE.
  • The subsequent USD weakness aided GBP/USD back to the 50-dma resistance at 1.2594, a break above which opens 1.2634 and levels last seen in mid-May.
  • The extended post-PPI reaction worked against JPY, which traded softer against all others in G10. This pressured a trade-weighted JPY index, and a further 0.25% depreciation puts JPY at new May lows, with another ~1.8% sell-off needed to hit pre-intervention cycle lows.
  • This highlights the strength of the EUR/JPY bounce over the past two weeks - with EUR/JPY ~1.4% shy of highs vs. USD/JPY's ~2.3%. A close at current or higher levels would mark seven consecutive sessions of gains in EUR/JPY, the longest winning streak since April of last year - which extended to 10 consecutive trading days.
  • Focus Wednesday shifts to the US CPI print, and in particular any signals for an out-of-consensus view on PCE. Fed market pricing still only fully discounts a first rate cut by the November FOMC decision, on which Powell commented today that policy is likely to be kept tighter for longer. Outside of the US inflation print, appearances from ECB's Rehn, Muller, Villeroy & Makhlouf and Fed's Kashkari & Bowman are due.