The USD is slightly stronger against major currencies as markets await U.S. inflation data. Stocks are cautious, bonds a bit stronger, and commodities mixed with varied performance in crude, iron ore, and copper. U.S. PPI data could show a 0.3% increase in overall prices and a 0.2% rise in core prices for the month. Annual PPI is projected to rise to 2.2%, while core PPI might slow to 2.3%. A rate cut by the Fed is not fully expected until November. A surprise increase in data might not greatly affect the USD, but weaker data could lower it more significantly. Fed Chair Powell will speak at 10 a.m. ET.
The CAD remains steady today, showing little change despite a sustained narrowing in US/Canada yield spreads, which hints at a potentially stronger CAD. Fair value dropped slightly to 1.3587 today. The CAD's short-term direction will depend on the market's response to this morning's U.S. data, but USD/CAD is likely to face increased selling pressure in the upper 1.36s. March Wholesale Sales data will be released at 8:30 a.m. ET.
The EUR briefly fell in early European trade, influenced by a sharp drop in the GBP, but has since rebounded to around 1.08. Germany's ZEW Survey showed better-than-expected investor expectations for growth and lower interest rates. Final CPI data from Germany and Spain were consistent with preliminary reports, while wages rose by 4.3% in Q1 year-over-year, outpacing inflation. This wage trend may influence ECB hawks.
Sterling briefly dipped after UK labor market data indicated a slight weakening, with the unemployment rate rising to 4.3% and jobless claims increasing by 8.9k in April. However, wages continue to rise, with Average Weekly Earnings up 5.7%, surpassing the expected 5.5%. BoE economist Pill suggested that rate cuts might be considered over the summer as inflation eases. Despite this, expectations for a BoE rate cut barely strengthened, and the Pound found support, rebounding to levels seen before the data release.
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