[Dollar Strength Persists] Market Reaction to U.S. CPI and the Next Focus: PPI
Following yesterday’s U.S. CPI release, the dollar extended its gains, with USD/JPY breaking above the ¥149 level in Tokyo trading, reinforcing the strong dollar trend. Today’s spotlight shifts to the U.S. Producer Price Index (PPI) for June.
✅ USD/JPY Hits ¥149 as CPI Highlights “Sticky Inflation”
June’s U.S. CPI was broadly in line with market expectations but rose from the previous reading, underscoring persistent inflationary pressures.
Although the dollar initially dipped after the release, buying quickly resumed, and expectations for an early Fed rate cut have faded further.
Against this backdrop, USD/JPY climbed above 149 during the Asian session, edging closer to year-to-date highs.
✅ Today’s Key Event: U.S. PPI (Producer Price Index)
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Reference Month: June
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Consensus Forecasts:
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Headline PPI MoM: +0.2% (previous +0.1%)
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Headline PPI YoY: +2.5% (previous +2.6%)
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Core PPI MoM: +0.2% (previous +0.1%)
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Core PPI YoY: +2.7% (previous +3.0%)
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Key Points:
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Slight acceleration expected on a monthly basis, while YoY growth is seen slowing.
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While the PPI impact is generally smaller than CPI, attention will focus on whether pre-tariff demand shows up in the data.
✅ Other Economic Events
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Europe: Eurozone Trade Balance (May)
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Emerging Markets: South Africa Retail Sales (May)
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U.S.:
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MBA Mortgage Applications (week of July 5–11)
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Industrial Production (June)
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Canada: Housing Starts (June)
✅ Key Speeches and Events
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Fed Officials: Barkin, Hummock, Governor Barr, Bostic, and Williams scheduled to speak.
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U.S. Beige Book: Insight into economic activity and price outlook across Fed districts.
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EIA Weekly Oil Inventory: Impact on crude prices in focus.
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Corporate Earnings: Major releases from Goldman Sachs, Morgan Stanley, Bank of America, Johnson & Johnson, Alcoa, and United Airlines — key indicators for financials and cyclicals.
✅ GBP: CPI Surprise Fails to Sustain Rally
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June CPI YoY: +3.6% (previous +3.4%), beating forecasts.
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GBP/USD spiked to 1.3417 immediately after the release but fell back to the 1.3380s during London trade.
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GBP/JPY briefly touched 199.74 before retreating to the low 199 range.
Background:
While the inflation surprise reduced BOE rate-cut expectations, the upside was driven mainly by energy and food prices, raising concerns about economic drag. As a result, gains were short-lived.
✅ Summary: Will Dollar Strength Continue?
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Post-CPI Trend: Early Fed rate-cut bets have receded, and dollar-buying remains dominant.
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Next Catalysts: U.S. PPI, Beige Book, and corporate earnings reports.
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GBP: Bought on inflation surprise but capped by growth concerns.
Bottom Line: Depending on tonight’s U.S. data and earnings, speculation could intensify for USD/JPY to break above 150.00. The market will continue to track U.S. yield movements and Fed policy signals as key drivers.
