Forexlive Americas FX news wrap 12 Jul: PPI not as friendly as the CPI

Yesterday, the US CPI was a friendly number as it came in lower than expectations. Today, the PPI data was the exact opposite. The headline numbers for the month were not only higher, but the prior months were revised higher as well.

The USD and yields move higher initially after the report, but the memory of the Chair comments this week where he talked about lower inflation and how it isn’t just about inflation but also the employment picture, along with the CPI data, sent yields and the dollar back to the downside.

Later at 10 AM the Michigan consumer confidence stayed near low levels (and below expectations) after the sharp, surprising drop from last month.

All of which helped to send the greenback lower vs all the major currencies today. At the end of the day, the USD was unchanged vs the CAD, but fell by -0.21% vs the CHF and had declines of -0.38% to -0.60% vs the other major indices (the USD fell -0.60% vs both the GBP and the JPY).

For the trading week the USD is ending mostly lower with only rising modesly vs the NZD. The greenbacks changes for the week vs the majors showed:

EUR, -0.61%
GBP, -1.35%
JPY, -1.78%
CHF, -0.08%
CAD, -0.035%
AUD, -0.53%
NZD +0.43%

Looking at the US debt market today, the yields moved lower with the 2-year the biggest decliner. The yield spreads continue to chip away at the negative yield curve today:

2 year yield 4.457%, -4.9 basis points. For the week, the yield fell -15.4 basis points.
5 year yield 4.107%, -1.6 basis points. For the week, the yield fell -12.3 basis points.
10 year yield 4.186%, -0.6 basis points. For the week, the yield fell -9.5 basis points.
30 year yield 4.398%, -0.5 basis points. For the week, the yield fell -8.1 basis points

Looking at the spreads:

2-10 year spread, -27.1 basis points which is the least negative close since January. For the week, the spread rose 5.7 basis points.
2-30 year spread, -5.9 basis points which is the least negative close also since the end of January. The spread rose by 7 basis points this week.

In addition to lower CPI, the yields were helped by favourable 3 and 10 year note auctions (met by strong domestic demand). The 30 year bond was a different story, but 2 out of 3 outweighed the most difficult 30 year auction.

In other markets: