Dollar steadies as hot wholesale inflation data tempers rate cut fervour
The euro and sterling were steady against the dollar after falling 0.5% and 0.3% on Thursday, respectively, while the Japanese yen rose 0.3% to 147.395 following stronger-than-expected GDP data for the second quarter.
Overnight, markets had to contend with US producer prices showing the quickest rise in three years in July amid a surge in the costs of goods and services, pointing to a broad pick up in inflationary pressures which analysts say could pose a dilemma for the Fed.
The hot measure of producer price inflation followed a comforting consumer inflation outcome earlier in the week which had boosted expectations of policy easing in the world's largest economy and helped lift risk assets across the board.
Odds of a 25-basis-point cut by the US central bank retreated slightly after the producer price figures, per CME's FedWatch tool.
A combination of supportive data and remarks from the US Treasury Secretary had also given rise to the possibility of an outsized 50-basis-point rate cut in September but those expectations were wiped out entirely after Thursday's data.
The wholesale US inflation data
'warranted a move in front-end rates and firmer dollar but a 25-basis-point cut at the Fed's September meeting remains the default setting,' said Chris Weston, head of research at Pepperstone.
The 2-year US Treasury yield was steady in early Asia trading at 3.7262% after rising by as much as 5 basis points on Thursday. On the far end of the curve, the 10-year US Treasury yield was at 4.2849% after rising by a similar degree overnight.
'The combination of elevated inflation and weak growth in jobs is a conundrum for the Fed,' Joseph Carpuso, head of international economics at the Commonwealth Bank of Australia, said in a note to clients.
Carpuso expects Fed Chair Jerome Powell to address that dilemma at his upcoming speech next week at the Kansas City Fed's annual central banking conference in Jackson Hole.
The remarks will be delivered amid the backdrop of data showing some impact of tariffs on US inflation at a time when the job market is also slowing.
'We're all waiting for something to give in terms of volatility,' said Alex Hill, managing director at Electus Financial Ltd in Auckland.
Hill expects 'a slow deterioration in the US data,' citing weakening underlying trends in the labour market and the pickup in inflation.
A key factor to watch for the greenback would be how the bond market digests increased amounts of government debt issuance in September and October, he said.
More immediately, the focus will also be on a summit between US President Donald Trump and Russian leader Vladimir Putin scheduled for Friday in Alaska.
Trump said on Thursday that he believes Putin is ready to end his war in Ukraine, but peace would likely require at least a second meeting involving Ukraine's leader.
Bitcoin and ether nudged up after dropping about 4% each on Thursday. Bitcoin had at one point touched a record high on Thursday on shifting Fed rate-cut expectations. Reuters
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Recorder
an hour ago
- Business Recorder
Oil prices climb after US adviser says India's Russian crude buying has to stop
SINGAPORE: Oil prices rose on Monday after White House trade adviser Peter Navarro said India's purchases of Russian crude were funding Moscow's war in Ukraine and had to stop. Brent crude futures rose 30 cents, or 0.46%, to $66.15 a barrel by 0629 GMT while US West Texas Intermediate crude was at $63.19 a barrel, up 39 cents, or 0.62%. Navarro said in an opinion piece published in the Financial Times that if India wants to be treated as a strategic partner of the United States, it needs to start acting like one. 'India acts as a global clearinghouse for Russian oil, converting embargoed crude into high-value exports while giving Moscow the dollars it needs,' Navarro said. The market's swift rebound after Navarro's comments highlights how fragile sentiment is. Any sign of Washington tightening its stance on India's Russian oil purchases reintroduces a risk premium, said Priyanka Sachdeva, senior market analyst at brokerage Phillip Nova. 'The US adviser's sharp words on India's Russian crude imports, paired with postponed trade talks, revive concerns that energy flows remain hostage to trade and diplomatic frictions, even as peace prospects in Ukraine brighten,' Priyanka added. Oil prices fell during early Asia trading after US President Donald Trump met Russian President Vladimir Putin in Alaska on Friday and emerged more aligned with Moscow on seeking a peace deal instead of a ceasefire first. Trump will meet Ukrainian President Volodymyr Zelenskiy and European leaders on Monday as the US president presses Ukraine to accept a quick peace deal to end Europe's deadliest war in 80 years. 'The status quo remains largely intact for now,' RBC Capital analyst Helima Croft said in a note, adding that Moscow would not walk back territorial demands while Ukraine and some European leaders would balk at the land-for-peace deal. On Friday, Trump said he did not immediately need to consider retaliatory tariffs on countries such as China for buying Russian oil but might have to 'in two or three weeks', cooling concerns about a disruption in Russian supply. China, the world's biggest oil importer, is the largest buyer of Russian oil, followed by India. Investors are also watching for clues from Federal Reserve Chairman Jerome Powell's comments at this week's Jackson Hole meeting regarding the path of interest rate cuts that could boost stocks to further records. 'It's likely he will remain noncommittal and data-dependent, especially with one more payroll and Consumer Price Index (CPI) report before the September 17 FOMC meeting,' IG market analyst Tony Sycamore said in a note.
Business Recorder
an hour ago
- Business Recorder
PSX records gains as KSE-100 crosses 147,000
Market sentiments remained positive at the Pakistan Stock Exchange (PSX) as investors reacted positively to a sovereign credit rating upgrade and a steady stream of robust corporate earnings, with the benchmark KSE-100 Index gaining over 600 points during the intra-day trading on Monday. At 1:40pm, the benchmark index was hovering at 147,146.15, a gain of 654.52 points or 0.45%. Buying was observed in key sectors including cement, commercial banks, fertiliser, oil and gas exploration companies, OMCs and power generation. Index-heavy stocks, including HUBCO, SNGPL, SSGC, MARI, OGDC, PPL, POL, MEBL and UBL traded in the green. Investor sentiments remained positive, buoyed by Moody's upgrade of Pakistan's sovereign rating and a wave of strong corporate earnings that kept sentiment upbeat. Moody's raised Pakistan's credit rating one notch to Caa1 from Caa2, shifting the outlook to stable. The decision, based on improving external buffers, fiscal consolidation, and progress under the IMF program, has provided a powerful boost to market morale. During the previous week, the PSX climbed to an all-time intraday high of 147,534 points before closing at 146,492 points, up 1,109 points or 0.8% on a week-on-week basis. Internationally, share markets edged higher in Asia on Monday ahead of what is likely to be an eventful week for US interest rate policy, while oil prices slipped as risks to Russian supplies seemed to fade a little. A general risk-on mood saw indices in Japan and Taiwan make record peaks, while Chinese blue chips reached their highest in 10 months. US President Donald Trump now seemed more aligned with Moscow on seeking a peace deal with Ukraine instead of a ceasefire first, after meeting Russian President Vladimir Putin in Alaska on Friday. Trump will meet Ukrainian President Volodymyr Zelenskiy and European leaders later on Monday to discuss the next steps, though actual proposals are vague as yet. The major economic event of the week will be the Kansas City Federal Reserve's August 21-23 Jackson Hole symposium, where Chair Jerome Powell is due to speak on the economic outlook and the central bank's policy framework. Markets imply around an 85% chance of a quarter-point rate cut at the Fed's meeting on September 17, and are priced for a further easing by December. The prospect of lower borrowing costs globally has underpinned stock markets, and Japan's Nikkei firmed 0.9% to a fresh record high. MSCI's broadest index of Asia-Pacific shares outside Japan was a fraction lower, having hit a four-year top last week. Chinese blue chips added 1.0%, bringing gains so far this quarter to almost 8%. EUROSTOXX 50 futures and FTSE futures rose 0.2%, while DAX futures firmed 0.1%. This is an intra-day update
Business Recorder
2 hours ago
- Business Recorder
US adviser Navarro says India's Russian crude buying has to stop
White House trade adviser Peter Navarro said India's purchases of Russian crude were funding Moscow's war in Ukraine and had to stop, adding that New Delhi was 'now cozying up to both Russia and China.' 'If India wants to be treated as a strategic partner of the US, it needs to start acting like one,' Navarro wrote in an opinion piece published in the Financial Times. India's Foreign Ministry has previously said the country is being unfairly singled out for buying Russian oil while the United States and European Union continue to purchase goods from Russia. US President Donald Trump an additional 25% tariff on Indian goods earlier this month, citing New Delhi's continued purchases of Russian oil, taking total tariffs on imports from India to 50%. 'India acts as a global clearinghouse for Russian oil, converting embargoed crude into high-value exports while giving Moscow the dollars it needs,' Navarro said. The adviser also said it was risky to transfer cutting-edge US military capabilities to India as New Delhi was 'now cozying up to both Russia and China.' Longtime rivals China and India are quietly and cautiously strengthening ties against the backdrop of Trump's unpredictable approach to both. White House defend firing of labor official as critics warn of trust erosion Indian Prime Minister Narendra Modi is set to meet Chinese President Xi Jinping at the end of the month while Chinese Foreign Minister Wang Yi will visit India from Monday for talks on the disputed border between the two countries. A planned visit by US trade negotiators to New Delhi from August 25-29 has been called off, a source said over the weekend, delaying talks on a proposed trade agreement and dashing hopes of relief from additional US tariffs on Indian goods from August 27.
