US producer prices are slightly better than expected - no reaction
This afternoon's producer prices in the US may have shown some slight pressure coming through, but levels are tame enough to ignore at these levels, with the headline annualised rate coming in at 1.8% - up from 1.7%. This is after August saw a 0.1% rise as expected, with the core rate up 0.3% on the month to produce a year on year rate of 2.3% - up from 2.1%.
Tomorrow we get the more influential consumer price data, which should see more of an impact on the USD pairs. However, only if we see a major upturn will we see the market reassessing the outlook on Fed policy which sees another 25bp cut later this month. Indeed, some are forecasting a larger 50bp, but this is now an outlier compared to a few weeks back. Softer ISM manufacturing PMIs and lower than expected headline jobs growth have cemented the rate cut for this month, but any more at this stage will be dependent on data, with US retail sales also due out at the end of the week.
So far today, we have seen little relent in USD/JPY, which is still pushing for a test on stronger resistance levels closer to 108.00. As we noted early on, this is all down to the pick up in bond yields, which serves to press on the JPY across the board - and not just against the USD.
However, EUR/USD is also heading lower now, but this is largely down to pre-emptive price action ahead of tomorrow's ECB meeting and announcement, with 1.1000 being tested at this moment. Interim support is seen here at 1.0985-95.