Morning Commentary: U.S. August PPI Provides a Surprise

Foreign Exchange - Morning Commentary

U.S. August PPI Provides a Surprise

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Alan Rose
Alan Rose
Foreign Exchange Head Trader
A very similar theme has been reoccurring in our morning commentary and that is the fact that almost all the markets remain largely unchanged. This seems particularly odd given all the recent turmoil in emerging markets and the potential for further U.S.-China trade sanctions. For now at least, markets seem to have priced in enough negative or positive news and remain listless and apathetic. The euro’s range overnight was a mere 37 bps which is a very narrow range; the euro, like many other currencies, seems to have found an equilibrium point for now.
The one bit of news that has moved the needle this morning was the U.S. August PPI. PPI fell by 0.1% against expectations of a gain of 0.2%... this was the first drop in inflation in 18 months. Prices fell primarily in the costs for services and food.  YoY PPI fell from 3.3% to 2.8%. Ex-food and energy, PPI also fell by 0.1% bringing the YoY rate down from 2.7% to 2.3%. U.S. interest rates are fractionally lower and the U.S. dollar is nearly unchanged against many of the major and emerging market currencies.
Tomorrow is a new day and hope springs eternal that we will see more market activity to pull us out of the doldrums. The Bank of England and the ECB both meet tomorrow and U.S. CPI for August is released tomorrow morning.
  • The benchmark MSCI Asia Pacific Index fell for a 10th consecutive day extending its recent decline to almost 5%. Ongoing concerns about trade, the strong U.S. dollar, emerging market turmoil and a bear market in Chinese stocks are some of the reasons behind the decline. Despite the decline, many Asian currencies have stabilized recently.
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