US Stocks Surge After Weak PPI Data – Nasdaq Up 2.4%
US stock markets rallied overnight as the latest Producer Price Index (PPI) data increased speculation of a 50-basis point rate cut from the Federal Reserve in September. The Nasdaq led the charge, closing up 2.42%, followed by the S&P 500, which gained 1.69%, and the Dow Jones Industrial Average, which added 1.03% to close just below the key 40,000 level once again. US Treasury yields declined following the data release, with the 2-year yield dropping 7.1 basis points to 3.944% and the benchmark 10-year yield falling 5.5 basis points to 3.854%. The US dollar weakened against major currencies, with the DXY index losing 0.5% to trade back at 102.56. Oil prices fell for the first time in six days, as hopes for de-escalation in the Middle East influenced traders. Brent crude declined by 1.96% to $80.69 per barrel, while WTI dropped 2.14% to $78.35 per barrel. Gold also retreated, with profit-taking flows pulling prices back from near record highs, finishing 0.29% lower at $2,465 an ounce.
FX Pairs at Key Levels Ahead of CPI Data
Major currency pairs are at critical levels against the dollar ahead of this week’s crucial CPI data release from the US. The weaker PPI print yesterday heightened expectations for a more significant rate cut from the Fed, and investors are hoping for a similar outcome today. The dollar index is now hovering just above its annual low, and a lower print today could see some key levels broken, especially in markets still jittery after last week’s volatility. The New Zealand dollar is testing strong resistance, which could be breached following the Reserve Bank of New Zealand’s rate decision this morning. The euro is trading just below multi-month highs, while the pound (Cable) awaits key UK CPI data ahead of the US release. Traders expect significant movements if either of these figures deviates from expectations. The yen market remains cautious after last week’s moves, and a weaker US number could prompt long-term shifts as interest rate differentials solidify the new trend.
Busy Trading Day Ahead
Traders are in for a busy day with key macroeconomic events scheduled across all three major trading sessions, culminating in the crucial US CPI update during the New York session. The focus will begin with New Zealand in the Asian session, as the RBNZ is set to deliver its latest rate update midway through the day. In the European session, attention will turn to the UK, with the release of CPI data. Traders are bracing for significant moves if there is a notable deviation from the expected 2.3% year-on-year increase. However, the main event will take place in the US session, where all eyes will be on the CPI numbers. Following yesterday’s PPI result, traders are anticipating a weaker print, with expectations of a 0.2% month-on-month increase in both the headline and core figures and a 3% year-on-year rise.
