Markets Rally After PPI Data – Nasdaq Up 1.5%
US stock markets rallied overnight after components of the PPI data suggested softer inflation. The headline figure was stronger than expected, but elements that contribute to the Fed’s preferred inflation measure, the PCE Index, were weaker. Investors seized on the prospect of potential rate cuts from the central bank. The Dow closed up 0.77%, the S&P 500 gained 1.04%, and the Nasdaq surged 1.5% higher.
US Treasury yields and the dollar both retreated, with the 2-year yield falling 4.7 basis points to 4.307% and the 10-year yield dropping 8.8 basis points to 4.529%. The DXY declined 0.79% to 107.06.
Oil prices had a relatively quiet session, with both major contracts closing near flat—Brent up 0.07% to $75.23 and WTI down 0.11% to $71.28. Gold continued its upward momentum in line with the weaker dollar, closing near recent record levels, up 0.9% on the day at $2,929.48.
Dollar Looks to Recover Losses on the Last Day of the Week
It has been a challenging week for dollar bulls, with the greenback losing nearly 1.4% over the last few sessions despite mixed economic data and geopolitical developments that would typically support a stronger dollar. While headline inflation figures in the US exceeded expectations, markets have taken a ‘glass half full’ approach. Despite a surge following the CPI release, the overall trend for the dollar has been downward.
Some FX traders believe the broader trend remains upward and view recent movements as a necessary correction. Many are now analysing longer-term charts for new entry points into long-dollar positions.
Quiet Calendar Day to Close Out the Trading Week
It has been another eventful week for traders, with central bank updates and key US economic data driving market movements. Wall Street closed on a strong footing last night, and investors are hoping for that momentum to extend into the final three trading sessions of the week.
With little on today’s macroeconomic calendar, there may be limited catalysts to disrupt the rally, though some profit-taking ahead of the weekend is possible. The only significant economic release comes during the New York session, with US Retail Sales data expected. The headline figure is projected to show a 0.2% month-on-month decline, while core retail sales are expected to rise by 0.3%. Traders anticipate some volatility around the release.
