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XTB TRADEBEAT

US inflation picks up but the greenback slides lower

Summary:

  • US PPI M/M rises by 0.4% M/M in October
  • Core reading also beats expectations in remaining at 0.4%
  • Despite rise in inflation USD remains lower on the day

 Recent months have seen a slightly concerning lack of inflation in the US as far as dollar bulls are concerned, with there being a notable pullback seen in both the CPI and PPI metrics. For the 4 PPI M/M releases from June until September there were 2 that missed consensus forecasts (August and September) one that was flat (0.0% in June) and one that actually showed a contraction (-0.1% in August). However, last month’s release saw a rise of 0.4% and this afternoon a second consecutive increase of 0.4% m/m looks to support the notion that inflationary pressures in the US are on the rise once more. Given a consensus forecast for today’s number of +0.1% the release is a clear positive surprise. 

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 US PPI has risen strongly in the last two readings and could now be set to continue the uptrend seen for much of the last 3 years. Source: XTB Macrobond

As well as the headline PPI M/M beating projections, the core reading was also higher with a 0.4% increase M/M inline with the prior number and comfortable above the 0.2% expected. 

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 The core US PPI has hit its highest level in several years and seemingly resumed its uptrend after the pullback over the summer. Source: Bloomberg

Despite the upbeat data the the US dollar is struggling to make a sustained gain so far and the market has been slipping a bit today with the currency trading lower against the majority of its crosses. 

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 The USD is lower against the majority of its FX peers on the day despite the upbeat data Source: xStation

Another market that is sensitive to US data and has seen a cleaner reaction is Gold. The precious metal appears to be weak of late with a sizable decline on Friday and this morning on no real supportive news suggests that there has been some significant selling.  

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 Gold has experienced several sizable decline in recent days that have been sharp in their size. Source: xStation

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 Longer term the market appears to remain in a downtrend with the 8 period EMA below the 21 on D1 and a break below the 1260 level could see the sell-off seen since the September high accelerate. Source: xStation

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