The USD is higher against all the major currencies as North American traders enter for the day. The greenback’s largest gain is against the JPY, rising 0.36%, followed by gains of 0.16% versus the CHF and 0.12% versus the CAD.
The dollar’s move comes as Treasury yields push higher ahead of today’s key U.S. PPI report. That will be followed by the CPI tomorrow, with both reports helping to shape expectations ahead of next week’s Federal Reserve decision.
Meanwhile, the EUR is modestly lower ahead of the ECB rate decision at 8:15 AM ET (see a preview HERE). The central bank is expected to raise its refinancing rate by 25 basis points to 2.65% from 2.40%.
In the Kickstart video, I take a technical look at the EURUSD, USDJPY and GBPUSD, outlining the key levels that will determine whether the dollar buyers can remain in control—or whether the sellers can take back control and where. Plan your trading day.
As mentioned, the main economic focus today will be the August Producer Price Index at 8:30 AM ET. Headline PPI is expected to rise 0.4% for the month after being unchanged in July, with the year-over-year rate accelerating to 5.3% from 4.7%. Excluding food and energy, PPI is expected to increase 0.3% versus 0.2% previously, lifting the annual core rate to 4.6% from 4.2%. With oil prices above $100 and the Federal Reserve meeting next week, a hotter-than-expected report could increase inflation concerns and expectations for another rate hike. A softer number would provide some relief for bonds and potentially weigh on the dollar.
Other releases today:
- 8:15 AM ET: ECB refinancing rate—expected to rise to 2.65% from 2.40%
- 8:15 AM ET: ECB deposit rate—expected to rise to 2.50% from 2.25%
- 8:30 AM ET: Initial jobless claims—205,000 expected versus 206,000 previously
- 8:30 AM ET: Continuing claims—1.780 million expected versus 1.779 million previously
- 10:00 AM ET: Existing-home sales—3.98 million expected versus 4.06 million previously
- 10:00 AM ET: Existing-home sales change—previously −1.7%
- 10:00 AM ET: Wholesale inventories—expected to rise 1.3%
- 10:00 AM ET: Wholesale sales—previously fell 3.0%
Looking at other markets, U.S. stock futures are mixed ahead of today’s PPI report (see a post on some pre-market stock moves here). The Dow is higher, the S&P is little changed, while the Nasdaq is under pressure as technology shares lag. The major indices are on a 3 day down streak after yesterday saw the Dow fall -0.77%, the S&P fall -0.48% andthe Nasdaq composite fall -0.64% (see post):. The S&P and Nasdaq closed below the 100 and 200 hour MAs (see post)
- Dow industrial average: +96 points
- S&P index: +1.5 points
- Nasdaq index: −116 points
European markets are mostly higher, although the gains are relatively modest. The U.K.’s FTSE 100 is the exception:
- Euro Stoxx 50: +0.11%
- Germany’s DAX: +0.01%
- France’s CAC: +0.19%
- U.K.’s FTSE 100: −0.29%
- Spain’s Ibex: +0.27%
- Italy’s FTSE MIB: +0.36%
Overall, the price action is cautious as traders await the U.S. inflation data and the ECB interest-rate decision.
In political/geopolitical news from the US, President Trump used Wednesday’s GOP midterm rally in Dallas to make the November election a referendum on his administration. He told supporters to vote as if his name were on the ballot and warned that a Democratic victory would reverse his policies on immigration, taxes, crime and the economy.
Trump also promised a $5,000 “Trump dividend” to every adult U.S. citizen if Republicans retain control of the House and Senate. He suggested tariff revenue could help pay for the plan, although he offered few details, and congressional approval would likely be required. Let me take a guess….it will be privately funded.
For the markets, the more important comments were focused on Iran and oil. Trump said the war with Iran would end “immediately after the election,” claiming Tehran was attempting to influence the midterms. Although he left the door open to negotiations, he said the U.S. was not currently looking for a deal and that his objectives extended beyond a nuclear agreement.
On oil, Trump acknowledged that getting prices back down would “take a little longer,” but predicted they would begin falling shortly after the election. He also said gasoline would eventually move below $2 per gallon.
The market takeaway is that Trump does not appear to be signaling a near-term de-escalation with Iran. With Middle East tensions already threatening global supplies, that may keep a geopolitical risk premium underneath crude oil heading toward the November election.
In the middle east news overnight, tensions remain elevated, helping to keep a geopolitical risk premium underneath oil. Iran said it attacked 10 vessels near the Strait of Hormuz in retaliation for U.S. strikes on Iranian tankers, although the U.S. denied that any of its ships were hit. Meanwhile, the Iran-backed Houthis expanded their operations in Yemen and moved closer to the Bab el-Mandeb Strait—another key shipping route—while Saudi Arabia continued retaliatory airstrikes following attacks on its airbase and oil infrastructure. With no signs of an immediate diplomatic breakthrough, the risks to oil supplies and inflation remain tilted to the upside. The price of crude oil is up $1.65 or 1.72% a $97.70. The high price reached $97.84. Brent crude is at $102.90 after cracking back above $100 level yesterday.
This article was written by Greg Michalowski at investinglive.com.