On July 16th, the U.S. Producer Price Index (PPI) for June, released by the Bureau of Labor Statistics on Wednesday, indicated that a retreat in oil prices has helped to partially curb escalating inflationary pressures. The data showed that U.S. PPI increased by 5.5% year-on-year in June, below the estimated 6.2%. On a monthly basis, it fell by 0.3%, whereas the forecast was for it to remain flat. The revised May PPI growth rate of 6% remains the peak since the end of 2022. The core PPI for June, excluding food and energy, rose 4.7% year-on-year, compared to an estimate of 5.2%; it increased 0.2% month-on-month, against an expected rise of 0.3%. The Bureau of Labor Statistics stated that the monthly decline in June's PPI was primarily attributed to a 1.4% drop in the goods index, the largest decrease since July 2022. Nearly two-thirds of the decline in the goods index came from a 12% fall in gasoline prices. Prices for diesel, jet fuel, crude oil, as well as thermoplastic resins and materials also decreased. Meanwhile, food prices recorded their first decline in nearly three months, falling by 0.6%. The index measuring early-stage inflation pressures in the production process—processed goods for intermediate demand excluding food and energy—rose 0.6%, marking the smallest increase so far this year.
In other news, the Bank of Canada announced on Wednesday that it would keep its benchmark interest rate unchanged at 2.25%, marking the sixth consecutive hold, in line with broad market expectations. The Bank stated that despite weak economic performance at the start of the year, the economy is expected to achieve annualized growth of 2.5% in the second quarter as some temporary drag factors fade. In prepared remarks, Bank of Canada Governor Tiff Macklem noted that the Canadian economy still faces significant uncertainty, but officials are growing more confident that the economy is gradually overcoming headwinds such as tariff adjustments and slowing population growth. He pointed out that while the Governing Council remains prepared to adjust the policy rate if necessary, the current level of 2.25% is appropriate for guiding inflation back to the 2% target while supporting economic recovery.
Key data to watch today includes the UK's May monthly GDP, May industrial production month-on-month, May goods trade balance, the U.S. initial jobless claims for the week ending July 6th, the Philadelphia Fed Manufacturing Index for July, U.S. retail sales month-on-month for June, and the U.S. pending home sales index month-on-month for June.
Gold / USD
Gold edged higher in a choppy session yesterday, closing slightly up for the day, with the current spot price trading around 4035. The primary support for gold's continued rebound has been recent weak U.S. economic data, which has tempered expectations for Federal Reserve rate hikes. However, expectations for a Fed rate hike within the year and lingering market risk aversion have limited the pair's upside. Focus today is on resistance near 4080, with support around 3980.
USD / JPY
The USD/JPY pair consolidated in a narrow range yesterday, ending the day with minor losses, with the current spot price trading around 162.10. Aside from profit-taking exerting some downward pressure, recent weak U.S. CPI and PPI data, which have cooled Fed hike expectations, were also significant factors weighing on the pair. Additionally, concerns about potential renewed intervention in the currency market by Japan also exerted some pressure. Focus today is on resistance near 163.00, with support around 161.00.
USD / CAD
The USD/CAD pair declined in a volatile session yesterday, hitting a fresh four-week low, with the current spot price trading around 1.4050. The primary factor pressuring the pair lower is the diminished expectation for Federal Reserve rate hikes. Furthermore, rising crude oil prices, supported by tensions in the Middle East, also contributed to the pair's weakness. The Bank of Canada's decision to hold rates steady during the session, which was in line with market expectations, had a limited impact on the market. Focus today is on resistance near 1.4150, with support around 1.3950.
Comments