Markets await PPI to confirm inflation trend

Today’s PPI report and consumer sentiment could influence upcoming decisions on rate cuts.

By Farah Mourad | 11 October 2024

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Market open
  • EUR/USD traded with mild losses near 1.0935

  • WTI consolidated its overnight gains

  • Germany’s final CPI met expectations

U.S. Markets

Today's economic landscape brings more inflation data into focus, following yesterday's hotter-than-expected Consumer Price Index (CPI) report. The inflation print surpassed forecasts, overshadowing the rise in jobless claims, which came in at 258,000, significantly above the anticipated 230,000. Despite this, markets still factor in 50 basis points worth of rate cuts by the Federal Reserve for later this year. Interestingly, Fed member Raphael Bostic hinted that holding rates steady in November could be an option, should the data support it.

The Producer Price Index (PPI) due today will be closely watched, offering further insight into whether yesterday’s CPI reading was an outlier or part of a broader inflationary trend. Additionally, attention will turn to comments from Federal Reserve officials, along with consumer sentiment and inflation expectations, which will likely influence the dollar. Strong consumer sentiment paired with rising inflation expectations could lend support to a stronger USD.

European Markets:

The European session opened with modest losses in the EUR/USD pair, trading near 1.0935, influenced by U.S. inflation concerns. Meanwhile, in the UK, weaker-than-expected GDP data added a layer of caution for investors. The UK's year-on-year GDP growth came in at 1%, falling short of the 1.4% forecast, and monthly growth remained flat. Services sector data also disappointed, raising concerns about the strength of the UK's economic recovery.

In contrast, Germany's final CPI figures matched expectations, offering some stability to the region's largest economy. Investors will continue to keep an eye on the ECB’s upcoming meeting, with many anticipating a rate cut, potentially bringing the deposit rate down to 3.5%.

Commodities:

Gold: Gold prices continued their upward trajectory for a second consecutive day, buoyed by market speculation that the Federal Reserve may not pursue aggressive easing. A shift towards safer assets, in light of global risk concerns, has further supported gold’s positive movement. However, the strong U.S. dollar has tempered gains, keeping a lid on XAU/USD.

Oil: WTI prices have steadied, consolidating their overnight gains. Geopolitical factors and worries over potential supply disruptions are providing underlying support. Nonetheless, the ongoing strength of the U.S. dollar has limited any significant upside in oil prices, as the market looks for fresh catalysts heading into the weekend.

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