Summary:
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USD trading higher on the day against most peers
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Soft inflation and manufacturing data fails to weaken the buck
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GBPUSD in focus; 1.2930 a key line in the sand
On the economic calendar two of the biggest events today have come from the US, with both the latest look at inflationary pressures and manufacturing activity coming in worse than expected. The December PPI Y/Y came in at 2.5% as expected and also in line with the prior reading. However, the M/M figure disappointed (-0.2% vs -0.1% exp) but perhaps more importantly the core reading were significantly worse. In Y/Y terms the ex food and energy fell to 2.7% against consensus forecasts for 3.0% and in M/M terms it unexpectedly declined, showing -0.1% compared to 0.2% expected and 0.3% prior.
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After several years of rising inflationary pressures, the PPI metrics could be seen to suggest that they have peaked and are set to pull back further going forward. Source: XTB Macrobond
At the same time as the PPI data, we also got the Empire state manufacturing index which came in at 3.9. The reading for January was well below the 10.0 estimate and marks a significant drop from the 11.5 seen beforehand - this was revised higher from 10.9. One particular cause for concern in the data was the current business condition index which fell to its lowest level since May 2017.
The Empire state manufacturing index recorded its second bad miss in a row and could be seen as a warning sign for the wider US manufacturing sector. Source: XTB Macrobond
There’s been a steady move higher seen in the US dollar today and despite the pretty soft data, the greenback remains fairly firm. The EURUSD earlier dipped down to the low 1.14s as the pair continued to pullback after last week’s false break higher. The market has found some buyers and bounced off its lowest level in a week but still trades lower than where it began the day.
The EURUSD fell to its lowest level in a week earlier, just above the 1.14 level. The market continues to trade in a choppy manner after last week’s breakout with possible resistance seen around 1.1460.
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