US Markets Mixed After Weak Data – Dow up 0.65%
US stock markets were mixed in trading again yesterday after PPI data came in much weaker than expected. The Dow and the S&P closed higher, recording 0.65% and 0.41% rises respectively, while the Nasdaq lost ground, closing 0.18% down. US Treasury yields reacted strongly to the weaker prints, with the 2-year dropping 9.2 basis points to 3.961% and the 10-year falling 7.8 basis points to 4.449%. The dollar edged lower against most of the majors, the DXY ending the day down 0.15% at 100.81. Oil prices took a hit after news of a US-Iran nuclear deal hit the wires, which could see sanctions eased, with Brent off 2.36% to $64.53 and WTI down 2.42% to $61.62 a barrel. Gold ultimately pushed higher in line with the weaker dollar, rising 2.01% to $3,240.87 by the close of the New York session.
Dollar Resilient After Poor Data
The dollar remained relatively strong in trading overnight after poor PPI results out of the US hit the market. The data came in well below expectations, with the headline PPI number at -0.5% vs expected +0.3%, and the Core PPI at -0.4% vs expected +0.3%. Even though Retail Sales data, released at the same time, came in slightly higher, we would normally expect a stronger reaction for the dollar on those kinds of misses. There was an initial downside reaction in most of the major pairs, but with the exception of USDJPY, which finished the day down 0.89%, there wasn’t too much weakening in the dollar. Fed rate cut expectations have not changed much at all either, and that could be one reason for the lack of depreciation in the greenback. Traders will be watching US data closely in the coming weeks, and further signs of weakening in the US economy will probably see bigger downside moves for the dollar.
Quieter Calendar Day to Close Out the Week
Investors are expecting smoother trading conditions today to close out the week, with a relatively quiet macroeconomic calendar not likely to produce too many surprises. The Asian session will have a focus on Kiwi markets midway through the day, though, as Inflation Expectations data is due out. The market is expecting to see the quarterly number come in around the 2.06% mark again. There is no major data set to be released in the London session today; however, we do hear from the Swiss National Bank Chairman Martin Schlegel when he speaks in Lucerne, so we may see some added volatility in the Franc. The US session has the US Preliminary University of Michigan Consumer Sentiment (exp. 53.1) and Inflation Expectations (last 6.5%) numbers out before the calendar week is closed out with an update from the Fed’s Mary Daly.
