Dollar and Yields Fall After CPI, Stocks Rebound

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The dollar falls at the start of the US session as well as Treasury yields after the consumer inflation data. While the headline CPI was higher than expected, the core CPI exceeded expectations. Commodity currencies are generally trading higher as US futures indicate a rebound in major stock indices. The European majors are also trying to recover, but the momentum is relatively weak. The yen is trading in a tight range, consolidating recent losses.

Technically, the focus is now on USD/JPY correcting from the current level, following rejection by long-term resistance at 125.85. Bringing minor support at 124.66 will bring deeper pullback. But overall, there should be no change in the uptrend. Any retreat should be contained above 121.27 support, leading to another push at 125.85 resistance.

In Europe, at the time of writing, the FTSE is down -0.45%. The DAX is down -0.35%. The CAC is down -0.12%. Germany’s 10-year yield is down -0.043 to 0.775. Earlier in Asia, the Nikkei fell -1.81%. Hong Kong’s HSI index rose 0.52%. China Shanghai SSE rose 1.46%. The Singapore Strait fell -0.99%. Japan’s 10-year JGB yield rose from 0.0052 to 0.244.

US CPI rose 8.5% YoY, Core CPI rose 6.5% YoY, highest since early 1980s

The US CPI rose 1.2% m/m in March, above expectations of 1.1% m/m. The core CPI rose 0.3% m/m, below expectations of 0.5% m/m.

For the 12-month period, the CPI accelerated from 7.9% y/y to 8.5% y/y, above expectations of 8.3% y/y. This is the highest annual rate since December 1981.

Core CPI fell from 6.4% yoy to 6.5% yoy, below expectations of 6.6% yoy. This is the fastest 12-month increase since August 1982.

The energy index rose 32.0% year-on-year while the goods index rose 8.8% year-on-year, the biggest 12-month increase since May 1981.

Germany ZEW economic sentiment fell to -41, stagflation outlook on…

Germany ZEW economic sentiment fell from -39.3 to -41 in April, but was better than expectations of -48. The current situation index rose from -21.4 to -30.8, above expectations of -35.0. Inflation expectations fell -43.4 points to 26.8.

Eurozone ZEW Economic Sentiment fell from -38.7 to -43.0, above expectations of -46.5. The current situation index fell -6.6 pts to -28.5. Inflation expectations fell -43.6 pts to 25.9.

“The ZEW economic sentiment indicator remains at a low level. Experts are pessimistic about the current economic situation and assume that it will continue to deteriorate. The decline in inflation expectations, which halved the considerable increase of the previous month, gives hope. However, the prospect of stagflation over the next six months remains,” comments ZEW President Achim Wambach.

UK salaried employees increased by 35,000 in March, unemployment rate fell to 3.8% in February

Payroll employees in the UK increased by 35,000 in March, compared to February. The number of employees on the payroll was 544,000, 1.9% above the pre-pandemic level in February 2020. The number of claimants fell by -46.9,000, above expectations of -41 ,1000.

In the three months to February, the unemployment rate fell to 3.8%, in line with expectations. This is -0.2% lower than the previous three-month period and -0.1% lower than pre-pandemic levels. The average salary including bonuses increased by 5.4% over the year, below expectations of 5.7%. The average salary excluding bonuses jumped 4.0% over the year, above expectations of 3.7%.

Japan’s PPI rose 7.3% year-on-year in March, the index at its highest since 1982

Japan’s business goods price index rose 7.3% yoy in March, slowing from 9.7% yoy, but beat expectations of 9.3% yoy . The March index, at 112.0, was the highest level since December 1982. The yen-based import price index jumped 33.4% year-on-year, signaling that the depreciation of the yen could amplify import inflation.

Separately, Finance Minister Shunichi Suzuki warned, “The government will closely monitor developments in the foreign exchange market, including the recent depreciation of the yen with a sense of vigilance. This includes the impact on the Japanese economy.

Australian NAB business confidence rose to 16, strong rebound driven by consumer demand

Australian NAB Business Confidence fell from 13 to 16 in March. Trade conditions increased from 9 to 18. Looking at some details, trade conditions increased from 11 to 24. Profitability conditions increased from 5 to 13. Employment conditions increased from 8 to 12.

“An increase in economic conditions headlined a very strong survey in March,” said Alan Oster, chief economist at NAB Group. “Companies reported very strong business conditions and a strong increase in profitability, indicating that demand continues to hold up as the economy rebounds from Omicron and growth picks up.”

“Business confidence continued to improve in March, with little evidence of a negative impact from events in Ukraine,” Oster said. “The outlook has also strengthened in terms of forward orders, indicating continued economic growth over the coming months.”

“Overall, the results depict a very strong rebound, driven by strong consumer demand.”

USD/CHF mid-day outlook

Daily pivots: (S1) 0.9287; (P) 0.9329; (R1) 0.9355; After….

The intraday bias in USD/CHF remains neutral for now. On the upside, a firm break of 0.9380 should confirm that the fall from 0.9459 has ended with three waves at 0.9193. Such a development will restart the short-term uptrend and bring the upside bias back to 0.9459 and then 0.9471 resistance. On the downside, minor support below 0.9280 will turn lower for support at 0.9193 next.

Overall, the medium term outlook will be neutral at best as long as 0.9471 resistance holds. A broader downtrend may further extend to 0.8756 (2021 low). However, a firm break of 0.9471 will indicate that the entire downtrend from 1.0342 (2016 high) has ended in waves down to 0.8756. Medium term uptrend should be in place to target 1.0237/0342 resistance area.

Economic Indicators Update

GMT Ccy Events Real Provide Previous amended
22:00 NZD NZIER Business Confidence Q1 -40 -28
23:01 GBP BRC Like-For-Like Retail Sales Y/Y Mar -0.40% 2.60% 2.70%
23:50 JPY Bank loans A/A March 0.50% 0.50% 0.40%
23:50 JPY PPI A/A March 9.50% 9.30% 9.30% 9.70%
01:30 USD NAB Business Trust Mars 16 13
01:30 USD NAB Trade Terms March 18 9
06:00 GBP Change in the number of applicants in March -46.9K -41.1K -48.1K
06:00 GBP ILO unemployment rate (3M) Feb 3.80% 3.80% 3.90%
06:00 GBP Average Earnings Including 3M/Y February Bonus 5.40% 5.70% 4.80%
06:00 GBP Average earnings excluding 3M/Y bonus February 4.00% 3.70% 3.80%
06:00 USD Germany IPC M/M March F 2.50% 2.50% 2.50%
06:00 USD Germany CPI Y/Y Mar F 7.30% 7.30% 7.30%
06:45 USD France’s trade balance (EUR) Feb. -10.3B -9.3B -8.0B
09:00 USD Germany ZEW Economic Sentiment Apr -41 -48 -39.3
09:00 USD Germany ZEW Current situation April -30.8 -35 -21.4
09:00 USD Eurozone ZEW Economic Sentiment April -43 -46.5 -38.7
10:00 USD NFIB March Business Optimism Index 93.2 95 95.7
12:30 USD March M/M CPI 1.20% 1.10% 0.80%
12:30 USD CPI Y/Y March 8.50% 8.30% 7.90%
12:30 USD IPC Core M/M March 0.30% 0.50% 0.50%
12:30 USD IPC Core A/A March 6.50% 6.60% 6.40%
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