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PPI fell unexpectedly, and the US dollar collapsed to a three-year low! How do traders deal with the market shock?
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Hello everyone, today XM Forex will bring you "[XM Forex Market Analysis]: PPI unexpectedly plummeted, the US dollar collapsed to a three-year low! How can traders deal with the market shock?" Hope it will be helpful to you! The original content is as follows:
On Friday (April 11), the March Producer Price Index (PPI) data released by the U.S. Bureau of Labor Statistics has attracted widespread attention from the market. Data shows that the monthly PPI rate in March unexpectedly fell by 0.4%, far lower than market expectations, while it rose by 0.1% after correction in February. Year-on-year, PPI rose 2.7% in March, further slowing down from 3.2% in February and also lower than market expectations of 3.3%. The core PPI (excluding food and energy) fell by 0.1% monthly, and the annual rate dropped to 3.3% from 3.5% in February. Analysis pointed out that a sharp decline in energy product costs is the main driving factor for the decline in PPI, but market concerns about future inflation still exist.
The US dollar is under pressure, and US Treasury yield fluctuations
The financial market responded quickly after the data was released. The US dollar index (DXY) continued to be under pressure during the American period, with a decline of 1.2% at around 20:37 Beijing time, reaching 99.65, and hitting a three-year low of 99.02 during the session. The weakening of the US dollar reflects the market's direct interpretation of the slowdown in inflation, coupled with cautious sentiment on the economic outlook. The U.S. bond market also fluctuated. The 10-year U.S. bond yield shranked its gains after the data was released, with the latest rise of 4.1 basis points to 4.433%, while the two-year U.S. bond yield remained flat at 3.845%, indicating the market's divergence in short-term interest rate expectations.
xmtraders.commodities such as gold and crude oil have performed inconsistently. Gold price is inIt rose slightly after the announcement, reflecting a brief rise in risk aversion sentiment, but then part of the gains were given up due to fluctuations in the US dollar. Crude oil prices are under pressure due to the signal of a decline in energy costs. WTI crude oil futures were around US$85 per barrel around 21:00 Beijing time, down about 1% during the day. The three major U.S. stock indexes fluctuated after opening, and the Dow Jones Industrial Average and S&P 500 fell after data was released, but then narrowed their declines due to a rebound in technology stocks.
Federal interest rate cut expectations: The probability of restarting interest rate cuts increased in June
The unexpected decline in March PPI data has added new variables to the Fed's monetary policy path. Eren Sengezer, an analyst at a well-known institution, pointed out that "producer price inflation unexpectedly slowed down in March, which may further reduce market expectations that the Federal Reserve will continue to maintain high interest rates." xmtraders.combined with the previously announced March Consumer Price Index (CPI) showing that airfares, hotels and other services have declined, inflation pressure shows signs of easing. The market generally expects that the Federal Reserve will resume interest rate cuts in June, and the cumulative interest rate cuts this year may reach 100 basis points. The current benchmark interest rate remains at 4.25%-4.50%.
However, the minutes of the Fed's March 18-19 meeting showed that policy makers are vigilant about the dual risks of high inflation and slowdown in growth. A Wall Street analyst who declined to be named said, "Although the PPI data eased inflationary pressure in the short term, weak domestic demand may indicate a weakening of economic momentum, which is a dilemma for the Federal Reserve." Market expectations for the pace of interest rate cuts have become more sensitive, and if subsequent data continue to show a slowdown in inflation, the probability of interest rate cuts in June will be further consolidated.
Impact of market trends: Short-term volatility and long-term uncertainty coexist
From the market trend, the immediate reaction triggered by PPI data is more concentrated on the adjustment of US dollar and US bond yields. "The US dollar index rebounded slightly after falling to a three-year low of 99.02, but the overall bear market tendency has not changed. Technical indicators show that the selling pressure is still strong." The weakening of the US dollar may provide support for assets such as gold and the euro in the short term, but the long-term trend still needs to be observed subsequent economic data and policy signals.
xmtraders.commodity markets are facing xmtraders.complex impacts. On the one hand, the decline in energy prices has eased the production cost pressure, and crude oil and natural gas prices may continue to fluctuate at low levels in the short term. On the other hand, market concerns about future inflation have heated up, and analysts from well-known institutions warned, "Inflation may rebound due to external factors in the next few months, which will have a potential thrust on xmtraders.commodity prices." The attractiveness of gold as a safe-haven asset may further increase when uncertainty intensifies, but we need to be wary of the suppression brought about by the rebound of the US dollar.
In terms of stock markets, short-term volatility in the S&P 500 and Nasdaq indexes reflects investors' ambivalent sentiment about the economic outlook. A New York hedge fund manager xmtraders.commented, "The PPI decline is good for growth stocks in the short term, but if the economic slowdown signal intensifies, the cyclical sectors may face greater pressure." In the long run, market trends will depend on the dynamics of inflation and growth.balance. If inflation continues to slow down and economic data has not deteriorated significantly, risky assets may have a respite; but if growth slows beyond expectations, the market may turn to defensive asset allocation.
Follow follow-up data and policy signals
Overall, the unexpected decline in PPI data in March has injected new uncertainty into the market. The pressure on the US dollar, fluctuations in U.S. Treasury yields and the differentiation of xmtraders.commodity prices all reflect investors' reassessment of inflation and economic outlook. The Fed's expectations for a rate cut in June have heated up, but the policy path still needs more data to verify. In the short term, the market may continue to fluctuate, and traders need to pay close attention to the guidance of subsequent employment, retail and other data to grasp potential trend opportunities.
The above content is all about "[XM Forex Market Analysis]: PPI unexpectedly plummeted, the US dollar collapsed to a three-year low! How do traders deal with the market shock?", which was carefully xmtraders.compiled and edited by the editor of XM Forex. I hope it will be helpful to your trading! Thanks for the support!
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