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Eyes on Alaska as USD up and bonds down on hot PPI

Vantage Updated Updated Thu, 2025 August 14 09:10
Eyes on Alaska as USD up and bonds down on hot PPI

* Dollar and treasury yields rise on strong US Producer Price data

* Presidents Trump and Putin will meet 1-on-1 in Alaska

* Wall Street closes flat as Fed rate cut bets waver

* Bitcoin hits fresh record highs above $124,500 and promptly falls 4%

FX: USD found a bid amid all the gloom and edged up past its 50-day SMA at 98.13 on the Dollar Index. The hotter than predicted PPI figures propelled the buck north. Economists reckon this data, which showed the biggest surge in three years, could push the core PCE, the Fed’s favoured inflation gauge released at the end of the month, a touch higher to 0.3% m/m and 2.9% y/y. PPI is essentially the cost of imported goods and measures price changes before they reach consumers. We had some pushback against a bigger 50bps September Fed rate cut by some officials.

EUR moved down back near to its 50-day SMA at 1.1624. EZ GDP remained at 0.1% q/q while industrial production saw a sharp drop which suggests the turn in the inventory cycle was driven by US frontloading rather than a genuine cyclical recovery.

GBP was one of the better performing majors versus the dollar, making a 5-week high at 1.3594 in the European session. But resistance just below here from the late July peaks saw cable move lower on the US PPI figures. UK GDP printed better than expected, with the Q2 figure at 0.3% versus 0.1% forecast. But some economists questioned the quality of growth and believe the MPC may look through the numbers.

JPY also outperformed but gave back a large part of its gains. The major had dipped to the 50-day SMA at 146.40 but quickly bounced after the hot PPI data. US Treasury Secretary Bessent remarked that the BoJ is behind the curve on inflation and is likely to hike rates soon. Along with the increased pace of Fed rate cut bets, interest rate differentials have become a focus again between the US and Japan. Markets price around 15bps of hikes by year end.

AUD underperformed after the latest Australian jobs data showed employment change slightly missed forecasts but was solely fuelled by an increase in full-time work. The jobless rate fell to 4.2% from 4.3%, as expected. Money markets favour a skip at the next meeting followed by a 25bps rate cut in November. They see room for one more additional move after that early next year.

US stocks: The S&P 500 printed up 0.01% at 6,467, another record close, the 18th of the year. The Nasdaq settled lower, by 0.07% at 23,832. The Dow Jones finished up at 44,927 gaining 0.01%. The DJIA is hovering just below its record high just above 45,000. Four sectors were in the green, with Financials and Healthcare leading the gains, Tech was virtually flat, and Industrials, Materials and Consumer Staples were the main laggards. The recent outperformance in the small-cap Russell 2000 index swiftly revered, as it traded 1.7% lower. The Trump administration is said to be discussing the US taking a stake in Intel, according to Bloomberg. This follows a meeting between Intel’s CEO and the White House earlier in the week. Tesla is said to be preparing to test its robotaxi in New York.

Asian stocks: Futures are mixed. APAC equities were also mixed even though we had a decent handover Stateside. The ASX200 was led by utilities and financials after Origin Energy and Westpac’s earnings. The Nikkei 225 retraced from record highs ad fell back below 43,000 on higher yields, a firmer yen and profit taking. The Shanghai Comp and Hang Seng were initially boosted by Tencent’s jump in profits but the upside was limited on soft new loans data which contracted for the first time since 2005.

Gold gave back some of its recent gains as it continued to closed below the 50-day SMA at $3,349. The dollar and Treasury yields perked up while focus is on the Trump-Putin Ukraine talks today in Alaska.

Day Ahead – Japan GDP, China data, US Retail Sales

Japanese Q2 GDP is predicted to print at 0.7%, down from the prior 2.2% in Q1. Exports weakened sharply in Q2 with inventories also dragging, though services and private consumption have shown recovery. Some negative effect from tariff noise is probable, but the deal reduces bigger downside risks. Underlying inflation is seen stalling before gradually re-accelerating.

Economic activity in China is expected to continue moderating while housing price weakness is ongoing. We get a data dump to finish off the week with industrial production likely slowing, though it has proven resilient to tariff headwinds after a strong print in June. Retail sales are forecast to slow with demand doubts lingering as policy impact eases, though back-to-back rises are forecast. Fixed asset investment is seen steady around 2.8%. The data is lagging while we await news on tariff talks after the 90-day truce was extended.

Consensus expects a headline US retail sales print of 0.5%, which would mean back-to-back rises after the 0.6% print in June. That was boosted by a jump in auto sales with rising prices expected from tariffs. The ex-autos measure is seen cooling to 0.2% m/m from 0.5%. Demand doubts remain with policy and trade uncertainty, and due to the weak recent jobs data and downward revisions, though lower interest rates could offset some of these concerns.

Chart of the Day – GBP/JPY trying to break resistance

Since the Liberation Day spike sell-off down to 184.36 and the bottom of a long-term bull channel from the 2020 lows, this popular pair has moved higher and back to the middle of the ascending channel. Prices poked above the October 2024 top at 199.70 but then fell sharply at the start of this month. Support was seen at a long-term peak from 2015 at 195.88 and we’re now back trying to push decisively above the resistance zone around 200. Notably, price action yesterday saw a sharp rejecitons of lower prices below 199. The next retracement Fib level (78.6%) of the July to August 2024 move down and potential intial resistance to more upside is at 202.12. The key pivot poit and resistance/support is 199.70.