PPI Sparks Rally Against the Buck for Majors


PPI Sparks Rally Against the Buck for Majors

JULY 14, 2021

The U.S. Dollar is trading in mostly familiar ranges as overnight equity markets remained cautious over the possibility of higher inflation getting in the way of the economic recovery. 


COVID remains a troublesome element and the uneven nature of re-opening economies is starting to make some wonder about the globe meeting its growth estimates for the remainder of the year. American futures are up on the expectation that Apple will have strong Q2 earnings.

As far as risk events are concerned, we are only awaiting Fed Chairman’s Jerome Powell testimony to congress as he begins his semi-annual Monetary Policy Report. Producer Price Index figures for June this morning revealed that indeed prices for suppliers are going up with actual readings across PPI measures almost doubling expectations. We shall see if the Buck dwindles any further, but the reaction thus far has been dollar-negative.

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The Euro has been teasing with its weakness, seeming ready to test new lows but coming just short. Recent commentary and data suggest there is a lot more room for the economy to improve and that the European Central Bank sees no need to increase borrowing costs. Nevertheless, the ECB will review its emergency programs and consider new ways to address all the bonds that have been purchased. We see volatility and expect the unexpected.


The “Kiwi” was the only currency to jump this morning prior to PPI numbers after the Reserve Bank of New Zealand decided to be more hawkish. In their policy announcement, officials stated that they will end Quantitative Easing this month. What seems to be even more optimistic for the Antipodean currency is the speculation that this opens the opportunity for the first interest rate hike by a major central bank when the RBNZ meets again on August 17th. Expect volatility and swings, not consistency.