Yesterday’s US Consumer Price Index (CPI) further highlighted the slowdown in inflation. As a result, the US bond yields declined, leading to increased selling pressure on the dollar, while the stock market experienced gains. Despite the recent release of US employment statistics, which showed job growth below market expectations, the resilience of wage increases and a decline in the unemployment rate confirmed the strength of the US labor market. There seems to be a positive sentiment that the US economy can avoid a hard landing and effectively control inflation.
Today, the focus will be on the June US Producer Price Index (PPI). It is expected to show a further slowdown in growth, with a forecasted year-on-year increase of 0.4% compared to the previous 1.1%. The core PPI is also anticipated to show a steady slowdown, with a projected increase of 2.6% compared to the previous 2.8%. Given the significant impact of yesterday’s CPI release, today’s PPI may be perceived as secondary information. Unless there are signs of a reversal in the inflation slowdown trend, major adjustments are unlikely.
In the foreign exchange market, the trend of a weakening US dollar is evident. The US dollar index has been declining for five consecutive business days since the end of last week. The rapid decline of the dollar raises questions about whether the price movements have reached short-term extremes. However, there is no significant panic observed as the price movements steadily consolidate without major disruptions. The focus will be on the extent of potential adjustment possibilities and the subsequent market dynamics in New York following the release of the US Producer Price Index.
With the attention centered around inflation rates, even though it may be inferior to the US CPI, the 21:30 Producer Price Index will also garner high attention. Depending on the results tonight, we can anticipate potential movements in the USD.
First, we will assess the results and price movements, and then plan to follow the subsequent trends accordingly.