Here’s what you need to know for Thursday, September 15:
The US dollar, which fell to a low of 109.257, didn’t stay there long on Wednesday and the index rallied to test the 109.70 in New York. Technically, the index is back on track for the 109.90s before a dovish Federal Reserve result is expected next week.
Meanwhile, Wednesday’s inflation data was friendlier, showing that August producer prices (PPI) fell for a second straight month as gasoline prices fell further, but this was not enough for markets to price in the Fed’s aggressive stance.
The U.S. Department of Labor reported that the producer price index (PPI) moderated in August, falling 0.1% mom, in line with forecasts, while the yearly reading fell a full percentage point to 8.7% from 9.8% the previous month . The core PPI rose 0.4% each month but topped estimates annually, peaking at about 7.3%.
There were no Federal Reserve speakers this week as the media blackout went into effect at midnight on Friday ahead of Chairman Jerome Powell’s press conference following the Sept. 21 decision.
Traders are expecting 75 basis points when their policy committee meets next week, lowering market hopes for a smaller rise. However, according to FEDWATCH, there is a one in five chance that the Fed will hike rates by a full percentage point, from zero a day before the inflation report. The two-year US Treasury yield, a guide to interest rate expectations, rose 3.834% on Wednesday.
As for other central banks, the yen rose 1% against the dollar on Wednesday after the Bank of Japan conducted an interest rate check in a possible preparation for currency intervention. According to Reuters, central bank officials called traders and asked the price of buying or selling yen. “However, actually stepping in to support the currency would be a bigger step.”
At the same time, Japanese Finance Minister Shunichi Suzuki told reporters on Wednesday that recent yen moves have been “rapid and one-sided,” adding that yen-buying currency interventions are among the government’s options should such moves continue. USD/JPY fell from a high of 144.96 to a low of 142.55.
The euro was little changed against the dollar around 0.9980 but has ranged between highs of 1.00236 and 0.99767 on the day.
GBPUSD moved between 1.1480 and 1.1590 to end the day higher despite a dollar rebound and data showing inflation eased in August after breaching the 10% level last seen in 40 years. ticked down.
AUD/USD doubled bottom near 0.6700 ahead of today’s jobs data and climbed towards daily high at 0.6760. It will be a busy day for the antipodes with New Zealand growth data to start later in the session ahead of the jobless figure.
New Zealand’s second quarter gross domestic product data were released today. “We have projected a 0.4% qoq expansion, but given the data volatility and mixed signals, a reading of plus or minus 1 percentage point of our selection wouldn’t come as a surprise,” analysts at ANZ Bank said.
“And while the RBNZ is up 1.8% qoq, we believe any disappointment in the monetary policy environment today is unlikely to carry much weight. CPI and wage inflationary pressures are still far too high, which coupled with ongoing fiscal stimulus this fiscal year (the year ending June 30, 2023), suggests the RBNZ has no choice but to keep the OCR hikes to at least 4% to continue. Indeed, in a world constrained to capacity, weaker than expected activity does not necessarily mean that inflation will slow.”
As for Australia’s employment numbers, “August’s jobs report may show a slight improvement after last month’s big disappointment as labor demand indicators (such as job advertisements) remain strong,” argued analysts at TD Securities. “However, we see downside risk if COVID-related disruptions to the labor market continue. A poor jobs report likely seals the outcome for a 25 basis point hike (TD: 25 basis points) in October after the governor’s dovish tone last week.”
In crypto, volatility hit as traders prepared for the Ethereum to proof-of-stake transition. Bitcoin and Ethereum are down more than 7% in the last 24 hours.
In commodities, gold fell from a high of $1,707.07 to a low of $1,693.78, while WTI blew up to hit a high of $90.17.