- Following a beat on all fronts in the Producer Price Index (PPI), the US Dollar demonstrates strength in trading.
- Traders take note of a decline in US Jobless Claims, further boosting confidence in the US Dollar’s performance.
- The US Dollar Index surpasses the 103.00 mark and continues to advance as the US session gains momentum.
The US Dollar (USD) is showing strength on Thursday following the release of both US Retail Sales for February and Producer Price data. Notably, it was the Producer Price release that influenced the direction of the Greenback. With both the Headline and Core measures surpassing expectations, traders are growing anxious about the potential uncertainty surrounding an initial rate cut from the US Federal Reserve in June.
Looking ahead, the only remaining economic data point for Thursday is the Business Inventories for January. Market analysts don’t anticipate this figure to have a significant impact, and instead, attention is turning towards the US session’s takeover as the European session draws to a close. Traders are also eagerly anticipating Friday’s releases, particularly Industrial Production and University of Michigan numbers.
Daily digest market movers: Another delay
Around 12:30 GMT, a substantial amount of data is scheduled for release:
Weekly Jobless Claims:
- Initial Claims decreased from 210,000 to 209,000.
- Continuing Claims rose from 1.794 million to 1.811 million.
US Retail Sales for February:
- Monthly Retail Sales rebounded from a revised -1.1% to 0.6%, falling short of the estimated 0.8%.
- Monthly Retail Sales excluding Cars and Transportation increased from -0.8% to 0.3%, below the expected 0.5%.
US Producer Price Index (PPI) for February:
- Monthly Headline PPI surged from 0.3% to 0.6%.
- Yearly Headline PPI climbed from 1% to 1.6%.
- Monthly Core PPI declined from 0.5% to 0.3%.
- Yearly Core PPI remained unchanged at 2.00%.
The January Business Inventories data is set to be released around 14:00 GMT, with expectations of a decline in inventory growth from 0.4% to 0.2%.
Equities are experiencing a downturn following the robust PPI print, erasing all gains made on Thursday in both European and US markets. According to the CME Group’s FedWatch Tool, expectations for a Fed pause in the March 20 meeting are at 99%, with the likelihood of a rate cut standing at 1%.
The benchmark 10-year US Treasury Note is trading around 4.27%, extending gains for Thursday and the week. Overall, yields are on the rise in the bond space.
US Dollar Index Technical Analysis: Okay, so not June?
The US Dollar Index (DXY) is on an upward trajectory, edging closer to breaking above 103.00 following the unexpected positive outcome in all aspects of the Producer Price data. Market sentiment was primed for potential confirmation of further disinflation, but contrary to expectations, the data presented a different picture. This development prompts questions about the feasibility of a rate cut in June and suggests a possible delay, given the narrower window for data to convince the US Federal Reserve of the optimal timing for the initial rate adjustment.
On the upside, the first significant resistance lies at 103.38, represented by the 55-day Simple Moving Average (SMA). Close by, a formidable barrier is anticipated, with the 100-day SMA positioned near 103.68, followed closely by the 200-day SMA near 103.70. Depending on the driving force behind the DXY’s upward movement, 104.96 emerges as a pivotal level on the upside.
Following the CPI print, the DXY failed to test or challenge the 55-day SMA, suggesting a downside bias. Further decline appears imminent, with the next significant support at 102.00, carrying pivotal significance. Subsequently, a breach below this level could pave the way for another leg down towards 100.61, the low of 2023.
