Dollar Buying Continues after Record PPI, EUR/USD Breaks Parity Again
Dollar stays strong in early US session after release of another record print of PPI inflation. Buying of Dollar is currently concentrated again Yen and Canadian. But the moves in Aussie and European majors are also picking up. Loonie is the worst performing one today, despite the mega 1% rate hike by BoC yesterday. It’s some what weighed down by oil prices, with WTI breaching April’s low. Yen is currently the second worst.
Technically, EUR/USD breaks parity with another fall today. A main focus is indeed on 100% projection of 1.1184 to 1.0348 from 1.0773 at 0.9937. As long as this projection level holds, there is still prospect of a near term rebound. However, sustained break there could prompt further downside acceleration to 161.8% projection at 0.9420. This should be decided in the next few days.
In Europe, at the time of writing, FTSE is down -1.36%. DAX is down -1.64%. CAC is down -1.56%. Germany 10-year yield is up 0.0607 at 1.203. Earlier in Asia, Nikkei rose 0.62%. Hong Kong HSI dropped -0.22%. China Shanghai SSE dropped -0.08%. Singapore Strait Times dropped -1.22%. Japan 10-year JGB yield dropped -0.0029 at 0.235.
US PPI rose 1.1% mom in July, 12-mnth rate at record 11.6% yoy
US PPI for final demand rose 1.1% mom in July, above expectation of 0.8% mom. For the 12-month period, PPI accelerated to a record 11.6% yoy, above expectation of 10.% yoy. PPI less foods, energy, and trade services rose 0.3% mom, 6.4% yoy.
US initial jobless claims rose to 244k, slightly above expectations
US initial jobless claims rose 9k to 244k in the week ending July 9, above expectation of 240k. Four-week moving average rose 3k to 236k.
Continuing claims dropped -41k to 1331k in the week ending July2. Four-week moving average of continuing claims rose 5k to 1340k.
EU downgrades 2022 Eurozone GDP forecasts to 2.6%, 2023 to 1.4%
In the Summer 2022 Economic Forecast, European Commission downgraded both 2022 and 2023 Eurozone GDP growth projections. Meanwhile, HICP inflation projections were upgraded for Eurozone in both years. .
Eurozone GDP growth forecasts:
- 2022 at 2.6% (downgraded from 2.7%).
- 2023 at 1.4% (downgraded from 2.3%).
Eurozone HICP inflation forecasts:
- 2022 at 7.6% (upgraded from 6.1%).
- 2023 at 4.0% (upgraded from 2.7%).
Valdis Dombrovskis, Executive Vice-President said: “Russia’s war against Ukraine continues to cast a long shadow over Europe and our economy. We are facing challenges on multiple fronts from rising energy and food prices to a highly uncertain global outlook.”
Paolo Gentiloni, Commissioner for Economy said: “Russia’s unprovoked invasion of Ukraine continues to send shockwaves through the global economy. Moscow’s actions are disrupting energy and grain supplies, pushing up prices and weakening confidence…
“In Europe, momentum from the reopening of our economies is set to prop up annual growth in 2022, but for 2023 we have markedly revised down our forecast. Record-high inflation is now expected to peak later this year and gradually decline in 2023…
“With the course of the war and the reliability of gas supplies unknown, this forecast is subject to high uncertainty and downside risks. To navigate these troubled waters, Europe must show leadership, with three words defining our policies: solidarity, sustainability and security.”
Australia unemployment rate dropped to 3.5%, lowest since 1974
Australia employment grew 88.4k in June, above expectation of 30.0k. Full time jobs grew 52.9k while part-time jobs rose 35.5k. Unemployment rate dropped sharply from 3.9% to 3.5%, below expectation of 3.8%. That’s the lowest level since August 1974. Participation rate rose from 66.7% to 66.8%. Monthly hours worked was essentially unchanged at 1856m.
Bjorn Jarvis, head of labour statistics at the ABS, said: “The 3.4 per cent unemployment rate for women was the lowest since February 1974 and the 3.6 per cent rate for men was the lowest since May 1976.”
“The large fall in the unemployment rate this month reflects more people than usual entering employment and also lower than usual numbers of employed people becoming unemployed. Together these flows reflect an increasingly tight labour market, with high demand for engaging and retaining workers, as well as ongoing labour shortages.”
USD/CAD Daily Outlook
Daily Pivots: (S1) 1.2988; (P) 1.3019; (R1) 1.3055; More…
USD/CAD’s strong break of 1.3082 confirms up trend resumption . Intraday bias is back on the upside. Next target is 100% projection of 1.2005 to 1.2947 from 1.2401 at 1.3343. For now, outlook will stay bullish as long as 1.2935 support intact, in case of retreat.
In the bigger picture, the firm break of 38.2% retracement of 1.4667 (2020 high) to 1.2005 (2021 low) at 1.3022 should confirm that down trend from 1.4667 has completed after defending 1.2061 long term cluster support. Further rise should be seen to 61.8% retracement at 1.3650 next. This will now remain the favored case as long as 1.2516 support holds.
Economic Indicators Update
| GMT | Ccy | Events | Actual | Forecast | Previous | Revised |
|---|---|---|---|---|---|---|
| 23:01 | GBP | RICS Housing Price Balance Jun | 65% | 70% | 73% | |
| 01:00 | AUD | Consumer Inflation Expectations Jul | 6.30% | 6.70% | ||
| 01:30 | AUD | Employment Change Jun | 88.4K | 30.0K | 60.6K | |
| 01:30 | AUD | Unemployment Rate Jun | 3.50% | 3.80% | 3.90% | |
| 04:30 | JPY | Industrial Production M/M May F | -7.50% | -7.20% | -7.20% | |
| 06:30 | CHF | Producer and Import Prices M/M Jun | 0.30% | 0.70% | 0.90% | |
| 06:30 | CHF | Producer and Import Prices Y/Y Jun | 6.90% | 7.30% | 6.90% | |
| 12:30 | CAD | Manufacturing Sales M/M May | -2.00% | 1.40% | 1.70% | 2.60% |
| 12:30 | USD | Initial Jobless Claims (Jul 8) | 244K | 240K | 235K | |
| 12:30 | USD | PPI M/M Jun | 1.10% | 0.80% | 0.80% | 0.90% |
| 12:30 | USD | PPI Y/Y Jun | 11.30% | 10.80% | 10.80% | 10.90% |
| 12:30 | USD | PPI Core M/M Jun | 0.40% | 0.50% | 0.50% | 0.60% |
| 12:30 | USD | PPI Core Y/Y Jun | 8.20% | 8.60% | 8.30% | |
| 14:30 | USD | Natural Gas Storage | 56B | 60B |