The US dollar is set to finish today with the first weekly loss in nine weeks ahead of University Michigan survey that will help investors understand how stubborn inflation is becoming. USD/JPY continues to trade mid 147-148 and EUR/USD is steady after dropping to a six-month low Thursday. GBP/USD is trading higher this morning, holding above 1.24. AUD/USD advances to a 10-day high around 0.6470.
The European Central Bank decided to lift interest rates by 25 basis points, its 10th consecutive hike and expressed concerns about inflation staying higher for longer. While many economists see this as the last hike and called it a “dovish hike”, ECB President Christine Lagarde was not able to confirm if rates have reached their peak yet at 4%. The euro fell to its lowest level since May and bonds rallied.
It makes sense, from a guidance perspective, to say that the ECB is probably done with its hiking cycle. Underlying inflation is easing, business surveys keep delivering warnings of a deterioration in activity and there is a weak credit availability.
US producer prices increased in August by the most in more than one year, driven by rising energy and transportation costs. The PPI for final demand advanced 0.7% in August, with the price at the gas pump surging 20% being the main driver. Excluding food and energy, the PPI rose 0.2%.
The Federal Reserve is set to meet next week, where a “hawkish pause” is priced in, leaving the door open for another Fed hike this year, following US Core CPI picking up and now PPI numbers also registering the same trajectory.
Have a good weekend.
