The USD fell sharply to the downside today with the greenback falling the most vs the NZD (-1.59%), the AUD (-1.49%) and the GBP (-1.15%). The declines were fueled by more tame inflation data. Pipeline producer prices inched up 0.1% in June, with the annual increase also at 0.1% as well. That was the smallest year-on-year rise in nearly three years.
The PPI data followed Wednesday’s consumer price index (CPI) report, which showed U.S. core inflation slowed a lot faster than expected (to 3.0% from 4.0% the previous month). MoM CPI came in at 0.2% in June against market expectations for 0.3%. Core inflation YoY was also lower than expectations at 4.8% vs 5.0% expected (and 5.3% last month).
The strongest to the weakest of the major currencies
The other data today was initial jobless claims. The U.S. initial jobless claims for the week ending July 8 came in at a seasonally adjusted figure of 237,000, which is less than the estimated 250,000. This represents a decrease of 12,000 from the previous week’s revised level and shows the jobs market remains strong. The 4-week moving average was 246,750, decreasing by 6,750 from the previous week’s revised average.
The continuing claims for the week ending July 1 were 1,729,000, slightly higher than the estimated 1,723,000, which is an increase of 11,000 from the previous week’s revised level. However, the 4-week moving average for continuing claims decreased by 10,750 to 1,735,250 from the previous week’s revised average. Like the initial jobless claims it shows strong jobs trends.
The market took the stronger jobs data in stride preferring to focus on the recent inflation data. Traders might also look at more workers leading to less wage pressure as jobs are filled. It also is good news for earnings as jobs beget spending. It is a storyline, which can change, but the trend lower in inflation is the drive in the markets, including the trend in the USD.
For the trading week (with one day to go), the USD is lower vs all the major currencies. The largest decline is vs the CHF (3.41%) and the NZD (3.02%).
- EUR, -2.35%
- JPY -2.84%
- GBP -2.32%
- CHF -3.41%
- CAD -1.24%
- AUD -2.92%
- NZD 3.02%
The DXY (dollar index) is down -2.45%
- EURUSD moved to its highest level since early March 2022. The next upside target comes at the 61.8% retracement of the move down from the 2021 high. That level comes in at 1.1274.
- GBPUSD: The GBPUSD extended above a swing area between 1.2950 and 1.3000 (now risk). The high price reached 1.3125. The next upside target comes at a swing area between 1.3146 and 1.3221 on the daily chart
- USDJPY:The USDJPY was mostly lower today but did fall below the 38.2% retracement of the 2023 trading range at 138.248. The current price is trading at 138.02. There is a swing area between 137.50 and 138.14. Below that sets the near converged 100 and 200 hour moving averages near 137.12
- AUDUSD: The AUDUSD tested the 61.8% retracement of the 2023 trading range at 0.6889. The swing high from June comes in at 0.6898. The high price stalled between the levels at 0.6894. The current price trades at 0.6884
The storyline of lower inflation and continued growth (and earnings?) is also boosting stocks. The major indices rose for the 4th consecutive day (every day this week). The gains were led by the Nasdaq index:
The snapshot shows:
- Dow industrial average rose 47.71 or 0.14%.
- S&P index rose 37.90 points or 0.85%
- NASDAQ index rose 219.60 points or 1.58%
Tomorrow, J.P. Morgan, Citigroup, and Wells Fargo kick off the earnings season for the current quarter.
European shares also closed higher today:
- German DAX rose 0.74%
- Frances CAC rose 0.50%
- UK’s FTSE 100 rose 0.33%
- Spain’s Ibex rose 0.26%
- Italy’s FTSE MIB rose 0.78%
In the US debt market
- 2-year yield 4.632%, -11.0 basis points
- 5-year yield 3.947%, -12.3 basis points
- 10-year yield 3.767%, -9.4 basis points
- 30-year yield 3.905%, -4.6 basis points
In other markets:
- Crude oil is trading up $1.46 or 1.93% at $77.22. The prices testing at 200 day moving average at $77.33.
- Spot gold is up $3.60 or 0.18% at $1960
- Silver is up $0.69 or 2.89% at $24.78. That’s the highest level since May 11
- Bitcoin moved higher and trades at $31,165
The markets will bid adieu to St. Louis Fed Pres. James Bullard. Bullard will be leaving the holes of the Federal Reserve to become the Dean of the business school at Purdue University. His last that the Fed will be on August 14.
Not so good news on labor (and inflation) was that the actors union went on strike. With the writers still on strike, Hollywood is not doing much. If the trend of labor strikes were to bleed into to other industries, that could be problematic for inflation down the road. For today, the markets ignored the news.