Daily Market Update

CPI underwhelms, USD tumbles, weakest in 5 weeks

May 15, 2024

The U.S. Dollar is losing ground all across the board following the release of Consumer Price Index figures from April showing less advancement than expected.


Indeed, CPI month-over-month came in at 0.3% versus 0.4% while the annual average remained at 3.4%. More importantly, Retail Sales revealed last month were flat, with no gain or loss, while an expansion of 0.4% was forecast. It is also worth pointing out that the Regional New York survey for May’s Empire Manufacturing came in more pessimistic than originally thought.

All FX is gaining over the Buck currently as it seems the economy could be slowing down while disinflation continues, thus making a more reasonable case for exercising loose monetary policy and cutting interest rates. While June’s chances of a cut at the June Fed meeting remain at 10.0%, both July’s and September’s chances have improved, with the latter now at 60.0%. This development follows yesterday’s statement by Fed chairman Jerome Powell during a trip to see Amsterdam in which he reiterated that the Fed’s next move will not be to hike borrowing costs.

On the geopolitical front, unfortunately, China’s leadership seems to have changed its tone regarding planned U.S. increases in tariffs on key industries such as solar cells, minerals as well as semiconductors. The tariffs range from 25.0% for batteries to 100.0% for electric vehicles. Former Trump administration tariff increases were not taken away, thus anger from China’s Commerce Ministry, demanding Beijing retaliate. Thus far, the Buck has fallen to its weakest level in 5 weeks per the Bloomberg Dollar Spot Index.

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Sterling is up to its best level in almost six weeks after numbers out of the U.S. suggest the Fed can move towards a “dovish” pivot. Without a ton to consume from the U.K. this week, inflation in the form of CPI will be closely watched the next. With an economy lacking strong momentum and inflation already down, the Bank of England is expected to make a cut or two this year. As of now, the chances that the BOE will make a cut on June 20th are at 59.0%. With the decreasing popularity of Rishi and his administration, there could be some volatile times ahead as surveys show a change of the guard may be coming.


The Euro climbed to a fresh new 5-week high against USD, aided by data suggesting stimulus could come from the Fed accompanied by improving elements for the Euro-zone as a whole. Q1 Gross Domestic Product advanced 0.3% as expected while March’s Industrial Production impressed by coming in a bit higher than anticipated at 0.6% vs. 0.4%. Friday, we will get CPI numbers as well as employment from various nations tomorrow. While the European Central Bank is expected to cut interest rates next month, the Euro is being held up by the idea that stimulus will only exacerbate the good fortunes witnessed across data points.


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