Oddly, DXY fell after a red hot PPI:
The entire market pivoted back to value over growth. AUD pumped:
North Asia sleepy:
AUD bears have surged on CFTC. Hard for the currency to fall much now:
Oil is trending higher. Big trouble here if it rolls on:
Dirt popped:
Miners too:
EM up:
EM junk slowly closing the jaws with DM:
As yields rise:
And Mag7 falls:
The US PPI was a shocker. BofA:
PPI tops expectations in January
Continuing the string on strong January inflation data, the Producer Price Index (PPI) topped expectations across the board.
Headline rose by 0.3%m/m(consensus: 0.1%), core increased by 0.5% (consensus: 0.1%) and core-core rose by 0.6% (consensus: 0.1%).
Core PCE likely to print at 0.4% m/m in January
Based on the January PPI and CPI (Consumer Price Index) data, we expect core PCE inflation to print at a soft 0.4% m/m in January (0.37% unrounded).
Given our forecast, we see risk that core PCE could round down to 0.3% m/m.
If our forecast proves correct, then the six-month annualized rate of core PCE would likely accelerate from 1.9% to 2.4% and the 3-month annualized rate would pick up from 1.5% to 2.5%.
Vindicated
The January inflation data vindicates the Fed’s wait-and-see approach.
Services inflation remains sticky, and the Fed would like to see more progress there to have confidence that inflation is returning to its 2% target on a persistent basis.
We still expect the Fed to start its cutting cycle in June when it will have four more CPI and employment reports.
January is usually a hot month for new year price rises. And, there were ironic price rises in finance derived from the bubble.
Even so, this is a bad print and gives the unlikely “no landing” scenario some legs.
While the market mulls this outcome, I can’t see how DXY falls. The overnight AUD bounce is idiosyncratic.
That said, so many bears on CFTC mean it is unlikely to fall much, either.
