Dollar, Bond Yields Slide on US PPI Revision

Euro Climbs to 1-Month Highs, JPY Weakens

Summary:

The benchmark US 10-Year Treasury yield tumbled to 4.44% from 4.50% yesterday following a downward revision in US March Producer Prices. While April’s US PPI rose 0.5%, March’s PPI was revised down to -0.1% from 0.2% previously. 

The Euro (EUR/USD) outperformed its peers, rebounding above the 1.0800 level to finish at 1.0820, a 5-week high. The Eurozone ZEW Economic Sentiment climbed to 47 from 43.9 previously, boosting the shared currency.

The Dollar Index (DXY), which gauges the value of the Greenback against a basket of 6 major currencies, slid to 105.00 from 105.30 previously. 

Against the Japanese Yen though, the Dollar (USD/JPY) climbed to 156.45 (155.85). Yen weakness extended as the Bank of Japan is expected to maintain accommodative financial conditions for the time being. 

Broad-based US Dollar weakness lifted the Australian Dollar (AUD/USD) to 0.6625 from 0.6600. Australia’s 2024/2025 budget returned to a deficit following a surplus of AUD 9.3 billion in 2023/2024. New Zealand’s Kiwi (NZD/USD) climbed to 0.6040 (0.6020). 

Sterling (GBP/USD) rallied 0.24% to 1.2590 (1.2530). Steady UK wage growth despite a drawdown in the labor market supported the British Currency. 

The Greenback eased modestly against most Asian and Emerging Market currency pairs. USD/SGD (Dollar-Singapore Dollar) dipped to 1.3517 (1.3540) while USD/THB (Dollar-Thai Baht) eased to 36.58 from 36.78. Against China’s Offshore Yuan, the US Dollar (USD/CNH) was little changed, at 7.2400 (7.2350). 

The USD/RUB pair (Dollar-Russian Ruble) plummeted 1.61% to 91.00 (94.00). Despite facing restricted convertibility, the share of Russian exports paid in Rubles jumped in 2024. 

Other data released yesterday saw the UK Unemployment Rate climb to 4.3% from 4.2%. Germany’s ZEW Economic Sentiment Index rose to 47.1 from 42.9, beating forecasts at 44.9.

Global equities rose. The DOW finished up 0.35% to 39,565 (39,483) while the S&P 500 gained 0.5% to 5,247 (5,220). Japan’s Nikkei 225 jumped 1.1% to 38,610 from 38,220 previously.

EUR/USD – the shared currency rebounded to 1.0820 from 1.0770 previously. Overnight the Euro soared to 1.0826, a 5-week high, before dipping at the New York close. The Euro traded to an overnight low at 1.0767.AUD/USD – the Aussie Battler jumped to 0.6625 from 0.6600 previously. Broad-based US Dollar weakness buoyed the Australian currency. Overnight the Australian Dollar traded to a high at 0.6628, while the overnight low recorded was 0.6579.USD/JPY – against the weakening Japanese Yen, the US Dollar advanced to finish at 156.45 (155.85). Despite a broadly softer Dollar, the Greenback maintained its bid against the Yen. The overnight high was 156.78 while the low recorded was 156.22.GBP/USD – the British Pound rallied to close at 1.2590 from 1.2530 previously. In choppy trade, Sterling soared to an overnight high at 1.2593 while the overnight low recorded was 1.2509.On the Lookout:

Today’s economic calendar kicks off with Australia’s Wage Price Index (q/q f/c 0.9% from 0.9%, y/y f/c 4.2% from 4.2% - ACY Finlogix). China is scheduled to announce its 1-year MLF (One-Year Medium Term Lending Facility Rate) which is forecast at 2.5% - ACY Finlogix.

Europe starts off with France’s Final April Inflation Rate (m/m f/c 0.5% from 0.2%; y/y f/c 2.2% from 2.3% - ACY Finlogix). The Eurozone follows with its Eurozone GDP Growth Rate (q/q f/c 0.3% from -0.1%; y/y f/c 0.4% from 0.1% - ACY Finlogix), Eurozone March Industrial Production (m/m f/c -0.2% from 0.8%; y/y f/c -1.8% from -6.4% - ACY Finlogix). Watch this set of data because the revisions are huge from previous data to current. 

Canada kicks off North America with its Canadian April Housing Starts (f/c 242K from 242.2K previously – ACY Finlogix), Canadian Final March Manufacturing Sales (m/m f/c -2.8% from 0.7% - ACY Finlogix). The US rounds up today’s date releases with its US April Retail Sales (m/m f/c 0.4% from 0.7%; y/y f/c 3.8% from 4.0% - ACY Finlogix), US April Core-(Ex-Autos) Retail Sales (m/m f/c 0.2% from 1.1% - ACY Finlogix), US April Headline CPI (m/m f/c 0.4% from 0.4%; y/y f/c 3.8% from 4% - ACY Finlogix), US April Core CPI (m/m f/c 0.3% from 0.4%; y/y f/c 3.6% from 3.8% - ACY Finlogix), and finally US New York Empire State Manufacturing Index (f/c -10 from -14.3 – ACY Finlogix). 

Trading Perspective:

Despite a rise in US Producer Prices, the downward revision in March’s PPI weighed on the Greenback. Today, the focus falls on the key US inflation report, and the rhetoric that follows from Federal Reserve officials. The slide in US treasury yields weakened the Greenback. Any further falls in US yields will push the Dollar even lower. 

The US Headline Annual CPI is expected to ease to 3.4% from 3.5% while Annual Core Inflation is forecast to dip 3.4% from 3.5%. If the US CPI data matches forecasts, the Greenback will steady, and trade within established ranges (overnight). If the Headline and Core Inflation data fall more than forecast, Dollar selling will intensify. The US CPI data will have to be higher than forecast, with Annual Headline at, for example, 3.6% and Core at 3.9%. 

Whatever the results are, expect FX volatility to remain elevated, possibly rising after the data releases. Get those tin helmets back on.

EUR/USD– The shared currency had a good session, climbing to finish at 1.0820, fresh 5-week highs. On the day, look for immediate resistance at 1.0830 (overnight high traded was 1.0826). The next resistance level lies at 1.0860. Immediate support can be found at 1.0790 followed by 1.0760 (overnight low traded was 1.0767). Look for consolidation in a likely trading range of 1,0750-1.0850. Trade the range, watch the post-US CPI moves. Source: Finlogix.comAUD/USD– The Aussie Battler jumped to 0.6625 from 0.6600 against the overall weaker Greenback. Look for immediate resistance today at 0.6650 and 0.6680. Immediate support can be found at 0.6600 and 0.6570 (overnight low traded was 0.6579). Look for a choppy trading session in the Aussie, likely between 0.6575-0.6675. Trade the range, preference is to sell AUD/USD on strength.USD/JPY– against the trend, the US Dollar climbed against the Japanese Yen to 156.45 (155.85) at the New York close. Immediate resistance today lies at 156.75 (overnight high traded was 156.78). The next resistance level is found at 157.00. On the downside, immediate support can be found at 156.10, followed by 155.90, 155.60, and 155,30. Look for another roller coaster ride in this currency pair, likely between 155.70-156.70.GBP/USD– Sterling advanced against the US Dollar to 1.2590 in late New York, up from 1.2530 previously. Look for immediate resistance today at 1.2620 followed by 1.2650. Immediate support can be found at 1.2560, 1.2530 and 1.2500. Look for another choppy trading session in the British Pound today, likely between 1.2510-1.2610. Prefer to sell Sterling on rallies today, unless US CPI comes out weaker than forecast.Happy trading and Wednesday all. 

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