U.S. Producer Prices increased 1.0% Y/Y during December, below the 1.3% estimate. And M/M PPI was -0.1%, +0.1% estimate. December Core PPI (excludes food and energy) was +1.8%, below the 2.0% estimate and the lowest reading since January 2021. All six measures of producer inflation either matched or were below market estimates and 2/6 were below November’s results. Today’s data is welcome news to the Fed as it neutralizes yesterday’s higher-than-forecast inflation at the consumer level (CPI) and keeps the overall inflation picture trending lower.
U.S. Treasury yields are lower in the near tenors and higher in the far tenors (>10-years), flattening the inverted curve. With inflation’s decline back on track (at least with today’s data), the implied probabilities of quarter point rate cuts at the FOMC’s mid-year meetings have spiked: 112% for May, 118% for June, and 101% in July.
The dollar is lower against the G10 pairs except for a 0.08% gain vs. the EUR. Today’s dollar losses neatly reverse yesterday’s gains. The dollar index is about flat, +0.05%, and midway between near-term support at 102.00 and resistance at 102.50.
The majority of global equity indexes are in the green today and futures are signaling higher opens for the S&P 500 and Nasdaq.
Gold has spiked, +1.61% today at $2,061.20/oz after trading as low as $2,013.13/oz. yesterday.
Next week’s economic calendar includes Retail Sales for December, Industrial Production, and preliminary Consumer Sentiment.
