From CPI Miss to PPI Shock: A Rollercoaster for the US Dollar

From CPI Miss to PPI Shock: A Rollercoaster for the US Dollar
Good morning traders! We head into the final session of the week after a Thursday packed with market-moving events. The spotlight yesterday was on the US Producer Price Index, which came in at a scorching 0.9% vs. 0.2% expected. That surprise triggered a sharp rally in the US dollar, with pairs across the board initially diving as traders rushed to price in hotter inflation pressures.

The immediate reaction in equities was negative – indices dropped quickly after the PPI release – but it didn’t last long. By the second half of the US session, buyers stepped back in, producing a textbook V-shaped reversal. By the close, the S&P 500 and Nasdaq were back near their daily highs, and DAX futures were also pushing upwards. The British pound held its ground after strong UK GDP data earlier in the day, while antipodean currencies and the yen gave up recent gains.

Now into Friday morning’s European session, the tone is cautiously positive for equities. Futures are firm, with some indices pressing towards recent highs. The US dollar, however, is giving back part of Thursday’s gains, showing that the PPI-driven surge may have been overextended. On the commodity front, gold and silver remain under pressure, with neither able to mount a convincing bounce, while oil is steady after a choppy week.

We’ve already had data from China – industrial production and retail sales both missed expectations, particularly retail sales at 3.7% vs. 4.6% forecast – a downbeat signal for demand. The rest of the day will bring US retail sales and the University of Michigan consumer sentiment index, which could set the tone for how the week ends on Wall Street.


 
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