Higher US producer prices fuel weaker dollar, stronger stocks
This morning’s release of PPI for June showed unexpectedly higher produce price inflation, in line with yesterday’s higher CPI data. The dollar is lower across the board, stocks are higher, and bond yields have dropped. Fed Chair Powell begins his semi-annual Monetary Policy Report to Congress at 12pm EST today, and traders expect him to repeat his narrative of waiting for sustainable job growth and that current inflation is transitory. Earlier today, the Reserve Bank of New Zealand said it will step away from its long-term asset purchase program. The Bank of Canada meets today, and it is also expected to further taper its asset purchases.
July 14, 2021
EUR/USD 1.1825 GBP/USD 1.3881 USD/CAD 1.2450 AUD/USD 0.7480 USD/JPY 110.0700 USD/CNH 6.4578 USD/ILS 3.2646 USD/MXN 19.9193 USD/CHF 0.9163 USD/INR 74.5875 USD/BRL 5.0875 USD/SGD 1.3535 USD/DKK 6.2926 USD/SEK 8.6303 USD/NOK 8.7421
The dollar is broadly lower against its peers. The unexpectedly high PPI data points to higher costs in the reopening of the economy. Bank earnings released this morning – BOA, Citi, Wells Fargo -- were mixed.GBP
The UK pound is higher, and in line with others amid a broadly weaker dollar. UK inflation data for June came in at 2.5% YoY, higher than 2.2% expected. Used car prices rising the most on record (+4.4% in June alone) were seen as the biggest factor. Housing prices rose 10% YoY, beating expectations of 9.4%.EUR
The euro is higher by 0.4%, a big rebound from yesterday’s decline below $1.18, it’s lowest level since the first week of April. Industrial Production for the euro area for May fell 1.0%, weaker than expected and lower than April’s revised increase of 0.6%.CAD
The Canadian dollar is up slightly, as traders await this morning’s Bank of Canada decision. The BOC is expected to reduce its weekly purchases by $1B, which follows April’s cut of the same amount. The hawkish move is expected to be tempered by comments of inflation being transitory (a la the Fed) and the need for a “complete recovery” in the labor market.ASIA/PACIFIC
The Chinese yuan moved little overnight as traders await tonight’s release of China’s GDP 2Q, and Retail Sales and Industrial Production for June. Expectations are for weaker numbers than previous periods.
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