European market rally, surprises in US PPI and Housing data

During the European session, market sentiment was bullish, with European indices rallying on the final trading day of the week. Notably, the German DAX broke free from its last sideway range, surging to fresh record highs above 17200 points.

Moving to the American session, the latest US Producer Price Index (PPI) inflation report was anticipated to show a slowdown in headline and core producers' price growth, while the housing market data was expected to reveal a modest uptick in building permits and stable housing starts compared to December.

However, the actual reports brought forth a surprising twist - while headline PPI showed minimal deceleration, core PPI experienced an unexpected acceleration.

• Headline (annual): 0.9% MoM vs 0.6% YoY expected (1.0% YoY previously)
• Core (annual): 2.0% MoM vs 1.6% YoY expected (1.8% YoY previously)
• Headline (monthly): 0.3% MoM vs 0.1% MoM expected (-0.2% MoM previously)
• Core (monthly): 0.5% MoM vs 0.1% MoM expected (-0.1% MoM previously)

Moreover, housing market data fell notably short of expectations, with building permits and housing starts both showing significant declines.

In response to the data, the USD surged post-release, while US index futures took a slight dip.

Gold turned south, slipping below the crucial $2,000 mark. This decline was further exacerbated by the benchmark 10-year US Treasury bond yield, which surged over 2% for the day, reaching above 4.3% following robust producer inflation data from the US. This upward momentum exerted significant pressure on XAU/USD.

Earlier in the day, UK retail sales data for January was released, the report, which was anticipated to show solid month-over-month increases in headline and core retail sales, exceeded expectations with unexpected year-over-year increases, triggering a spike in the GBP market.