USA PPI Had a Huge Impact on the Markets Followed by Tonight USA CPI and Eurozone CPI

Market Overview:

The Dollar Index (USD/DXY) experienced a rebound, decreasing from 103.274 all the way to 102.628. This drop has happened by a weaker than expected PPI on the 13/08/2024 from USA, with the expectation being for the core PPI (MoM) (Jul) 0.2% that came in at 0% and the previous has been revised down from 0.4% to 0.3% same goes for the PPi (MoM) (Jul) that was expected to be 0.2% as no change from the previous but in reality, came in at 0.1%. 

 Source: Finlogix Economic CalendarIn the currency markets, the USD/JPY pair stabilized at 147.00, down from 142.00, as traders began unwinding Yen carry trades. This was prompted by the Yen's earlier rally against the US Dollar, driven by shifts in risk sentiment.

USDJPY M15

 Source: Finlogix ChartsThe Australian Dollar (AUD/USD) saw a modest recovery, settling at 0.66200 after the Reserve Bank of Australia (RBA) held rates steady but issued a cautionary note on inflation. The Aussie had tumbled to a low of 0.65852 earlier in the week but managed to regain some ground.

Meanwhile, Sterling (GBP/USD) has changed the direction of the downward trend, closing at 1.28735, down from 1.2680, in response to the unfavourable data point coming from the USA (PPI) and a dovish FED pricing a 50bps cut now for the next month meeting (18th of September)—This is the first time the market has been pricing a 50bps cut from the FED since end of 2023 in December. Market participants are now anticipating a quicker pace of rate reductions by the FED.

GBPUSD 1H Chart 

 Source: Finlogix ChartsThe Euro (EUR/USD) has been the most affected pair moving a staging 0.60% from the PPI data point release from the USA, ending the NY Session at 1.09991, 70 pips up move from 1.092. Today we will have the GDP from the Euro Zone that will have a huge impact on the euro pairs, my expectations are an inline reading with consensus or a bit higher than what is to be expected. 

EURUSD H1 Chart 

 Source: Finlogix ChartsEconomic Data Highlights:

Global bond yields rebounded after their earlier slump, with the US 10-year Treasury yield closing at 3.87%, down from 3.92%. The Euro 10-year rate also has had a decline from 2.27%, ending at 2.18%.

In the equity markets, Wall Street saw a significant rally, with the S&P 500 rebounding to 5,331, while the Australia's ASX 200 also posted gains, finishing at 7,920.

Looking Ahead:

Today’s economic calendar is relatively light, with key data releases from New Zealand (with an unexpected pause from the RBNZ), UK CPI & PPI, French HIICP and CPI, Eurozone GDP and Industrial production, Core CPI for USA and CPI. 

Trading Perspective:

While markets have shown signs of stabilization, investor sentiment remains fragile. The recent rebound in Wall Street stocks has provided some reassurance, but the overall outlook is still uncertain. The USD/JPY pair reflects the cautious mood, as traders continue to assess the impact of unwinding Yen carry trades. Expect a cautious start in London session after UK CPI and followed by the Eurozone CPI on markets today, with the US Dollar will likely try to maintain its support levels.

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