US producer prices falling
In a sign that inflationary pressures are subsiding, the latest producer price data for September shows a decline of 0.3%, translating into an annualised rate of 1.4% down from 1.8%, which was what was expected. The monthly figure was expected to return a modest rise of 0.1%, so this will have a negative impact on headline CPI, which is due out later this week.
In turn, this is further ammunition for the dovish members of the FOMC to press the case for further rate cuts, and with the ISM data out last week, certainly endorses the likelihood that we may well see further rate cuts into year-end. Whether this would spell fresh weakness in the USD remains to be seen, as we have often noted the lack of any real alternatives to the greenback, given external weakness seen the world over.
The reaction to the lead USD pairs has been minimal to say the least, with EUR/USD still pressing unsuccessfully into offers seen ahead of 1.1000. This area continues to cap the upside, where earlier buying was fended off a move above the figure.