Midday brief – US PPI Data In Focus

Market participants seem to be pricing in a 25bps hike in May by the Fed, which is expected to be the last following softer inflation data from the US. The UK economy shrank in March along with the production sector as a result of winter strikes. Sentiment got lifted by the rate pause signal after easing US inflation.

GBPUSD traded +0.25% higher above the 1.2500 mark amid dollar weakness. The greenback continued down after inflation cooled off more than expected in March, reviving Fed rate cuts bets. Early in the European trade, the UK data showed the economy slowed more than expected due to winter strikes. The country’s GDP fell to 0.0% from an expected 0.1% and January’s 0.4%.

The data came along with disappointing manufacturing production at 0.0% vs 0.2% expected and industrial production at -0.2% against 0.2% survey. The cable rallied from 1.2480 and may seek 1.2550 and 1.2650.

EURAUD dipped -0.32% in the aftermath of upbeat employment data from Australia. The data showed that 53 000 new jobs were created in March as compared to the 20 000 surveyed while full employment surged to 72 200 against 8 000 anticipated.

The data saw the unemployment rate drop to 3.5%. The AUD also got lifted by upbeat data from its top trade partner China, which had more exports in March. Data from Germany showed that inflation in the country remained unchanged at 0.8% while industrial production in the Eurozone soared to 1.5% from 1.0%. Sellers may reclaim 1.6300, however, if bulls manage to take over 1.6500 will be the near-term target.

CADJPY surged +0.41% post-Bank of Canada`s meeting on Wednesday. The central bank kept rates unchanged at 4.50% as expected in April. However, the CAD strengthened against the Yen as the new Bank of Japan, Kazuo Ueda stands with easy monetary policy.

The policy divergence weighs on the pair, with the BoC sitting at 4.50 % and the BoJ at -0.10%. Later on, the BoC Governor Macklem will be speaking. Above 99.50 bulls may soar to 100 and 101.20.

European stocks edged higher in the European trade session. The CAC40 continued higher above the 7400 mark, now trading in the 7450 regions. DAX traded at +0.16% with a bullish cap at 15 800 and a possible retest of 15 620 on the downside. UK 100 rose +0.28% capped by 7860 and 7900 on the rally.

US stock futures rose ahead of PPI data from the US. The S&P 500 futures were up +0.13% although the downside looks more likely if the 4080 low fails to hold. The DJIA futures gained +0. 10% trading between 33580 and 33710. Nasdaq 100 futures rose +0.29% trimming down a 3-day loss to 12 820. Further up bulls may be challenged by 12 950.

Elsewhere, gold prices rose for the third consecutive day riding on the back of a possible Fed rate pause and the Fed’s forecast of a mild recession. XAUUSD was up +0.56% as buyers eye 2050 in the near term.