- US March PPI -0.5% m/m vs 0.0% expected
- US weekly jobless claims 239K vs 232K expected
- ECB's Kazaks: Risk of recession is non-trivial. Rates will need to go up more.
- US 30 year fixed rate mortgage 6.27% in the April 13 week
- IMF's Georgieva: Inflation rates are still too high
- BOE's Pill: High frequency indicators of momentum in wage developments appear to be easing
- BOE Pill: Do not expect a discontinuity in household spending as homeowners refinance
- OPEC leaves demand forecast unchanged but flags downside risks to summer outlook
- US treasury auctions off $18 billion of 30 year bonds at a high yield of 3.661%
- US arrests Jack Texiera in connection with classified document leaks
Markets:
- AUD leads, USD lags
- Gold up $25 to $2040
- WTI crude oil down $0.96 to $82.30
- US 10-year yields up 2.8 bps to 3.45%
- VIX closes at lowest since January
- S&P 500 up 54 points, or 1.3%, to 4146
There was certainly some action in the FX market today as a soft PPI report helped to confirm that US inflation is headed south. Prices fell 0.5% m/m and with CPI also missing yesterday, the reaction was to sell the US dollar and buy risk assets.
But it certainly wasn't immediate. The market reaction in the two hours after the data was minimal but it started to build from there and was like a snowball downhill. The euro and pound each added 50 pips on the day with EUR/USD taking out the January high in a rise above 1.10. That's the best level in a year.
Those kinds of breakouts were a common occurrence with the pound also touching the best level since last June. The market is at 70% for one more Fed hike but there's now little worry that it's one-and-done (at worst). From there the question is: How much will the Fed throttle growth before cutting? The average hold at the end of a hiking cycle is 7 months, which would take the Fed to December.
The commodity currencies certainly weren't flagging a quick tumble in growth today as AUD/USD posted a strong day to climb above the April highs and the best in seven-weeks. The loonie also hit a two-month high, even with oil down nearly $1.
A chart on many screens right now is the dollar index as it tests the lows of the year. One pair restraining a breakout is USD/JPY. It fell sharply on the data from 133.40 to 132.00 but picked up bids at the figure to bounce 70 pips. The positive risk trade helps that pair and yields moved up on falling volatility.
Up next we get the US retail sales report and some major bank earnings on Friday so that should keep things moving.
