Hello, traders. Welcome to Thursday. Markets are opening into a wave of volatility after yesterday's major economic event: the U.S. inflation report. The Consumer Price Index (CPI) came in lower than expected, delivering a surprise miss that quickly rippled across all major assets.
The market's reaction was swift and clear—the U.S. dollar weakened significantly, reflecting renewed expectations for interest rate cuts. The movement gained further momentum when Donald Trump reignited pressure on the Federal Reserve, emphasizing that the inflation miss is another reason for Jerome Powell to cut rates. This added political fuel helped accelerate the dollar's downside.
Turning to today’s calendar, we shift focus to Producer Price Index (PPI) inflation from the U.S., which will be the next test for dollar sentiment. Earlier this morning, we also received GDP data from the UK, which disappointed with a -0.3% print—well below expectations. That has weighed heavily on the British pound, placing it among the weakest currencies of the day, alongside the Australian dollar and the U.S. dollar.
On the flip side, safe havens are in demand. The Japanese yen and Swiss franc are showing strength this morning, capitalizing on the cautious sentiment.
Adding to market noise, we had comments yesterday from Donald Trump about a possible trade deal with China. While initially perceived as optimistic, closer inspection revealed no tangible progress—just vague assurances that talks are “moving in the right direction.”
In the commodities space, oil saw a strong rally yesterday, but prices are cooling off slightly today—likely a result of profit-taking. Meanwhile, gold surged following the inflation release and is holding gains, reflecting the broad shift away from the U.S. dollar and toward defensive assets.
As we move further into the trading day, all eyes remain on U.S. PPI data and how markets will digest another piece of the inflation puzzle.