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GBP

Calm After the Storm Brings Currency Volatility Down

Treasury yields are stabilising and the dollar is recovering ground after losing a little altitude during yesterday’s session when a closely-watched input cost index climbed by less than expected. The producer price index for final demand rose just 0.2 percent month-over-month in March, with a third consecutive increase in services costs obscuring a cooling in many of the components that go into the Fed’s preferred inflation indicator. Taken in combination with Wednesday’s consumer price print, the data suggest that the personal consumption expenditures index will rise somewhere between 0.2 and 0.3 percent on a month-over-month basis when the next update...

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ECB & US PPI calm nerves

• Improved sentiment. A soft US PPI report & ‘dovish’ ECB helped calm market nerves. US equities rebounded. The AUD clawed back some ground.• ECB policy. The door to an ECB rate cut in June looks wide open. Diverging trends with the RBA can be AUD/EUR supportive.• Data calendar. The MAS meets today, China trade data is also due, while in the US a few Fed members speak. After the burst of volatility following the hotter than projected US CPI inflation data markets settled down overnight. US equities rebounded with the S&P500 (+0.7%) back up where it was earlier in...

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Markets Grapple With New Rates Landscape

Markets are extending yesterday’s moves after another hotter-than-expected inflation report delivered a serious blow to market expectations for an imminent pivot to easing from the Federal Reserve. Data out yesterday morning showed core price indices rising more than forecast on a monthly and annual basis in March, making it more difficult to believe that the January and February numbers were lifted by residual seasonality. Jerome Powell’s preferred “supercore” measure accelerated to 5 percent on an annualised basis as core transportation, medical, and education services prices remained stubbornly elevated. Fixed income markets reacted badly. Swap-implied odds on a June rate cut...

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Another US CPI market jolt

• US inflation. A higher than expected US CPI generated a sharp repricing in US rate expectations. This supported the USD & dampened sentiment.• AUD tumble. The shift in market pricing & stronger USD has push the AUD lower with the AUD’s April revival unwinding overnight.• AUD crosses. The AUD also underperformed on the crosses. We think this looks a bit overdone. ECB meeting, US PPI, & Fed speakers in focus tonight. Another hotter than projected US CPI reading jolted markets overnight as it further challenged the US Fed’s view that inflation pressures are on a glidepath back down to...

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All eyes on US inflation

• Waiting game. Most markets consolidate ahead of tonight’s US CPI report. US bond yields a little lower, while the USD index tread water.• AUD revival. Firmer base metal prices helped the AUD. The AUD’s recent rebound is inline with its seasonal pattern. Will the US CPI stop its upswing?• RBNZ meeting. RBNZ meets today. It may not (yet) tweak its forward guidance. This may see AUD/NZD’s upturn temporarily stall. Tonight’s US CPI inflation report (10:30pm AEST) is the key event for markets, and with it coming closer into view it isn’t surprising most of major asset classes consolidated overnight....

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