USD remains higher after PPI miss; Gold forming a base?

Summary:

• US PPI data misses forecasts

• Initial jobless claims falls more than expected

• Gold looking to build a base?

On a quiet day of economic releases, the standout data from the US has shown mixed signals with the latest inflation figures disappointing while at the same time employment figures beat forecasts. This in a nutshell sums up the seemingly unusual place we have found ourselves in for a while now with regards to US macro data as the country still appears to be lacking any real pick-up in price pressures despite a relatively tight labour market. The US dollar remains higher against most of its peers on the day, with the trade-weighted index remaining near prior swing highs around 95.45.

USD remains higher against almost all its peers on the day, with only the GBP managing to rise against the buck. Source: xStation

Looking at the data itself, the most important here is the PPI figures, which could well provide a sneak preview into what tomorrow’s more widely followed CPI equivalent will bring. In M/M terms the there was clear disappointment with a flat print of 0.0% for the headline - well below the 0.2% expected and the 0.3% seen previously. The core reading was also a miss with a 0.1% showing a slight gain, but still less than the 0.2% forecast and 0.3% prior. In Y/Y terms the data doesn’t look so bad, but again both the headline and core reading missed forecasts, in this case both by 0.1%, coming in at 3.3% and 2.7% respectively.

The rise seen in recent years for inflation as shown by the PPI may be easing off a little with the latest figures showing a slower than expected increase. Source: XTB Macrobond  

Almost everyone knows that the US labour market is strong with a series of stellar prints in recent years which have driven the unemployment rate down below 4%. As such the markets aren’t as sensitive to the weekly initial jobless claims figures as they were in years gone by, but they shouldn’t be totally overlooked however. The latest figures showed 213k people filed for unemployment benefits in the past week, less than the 220k expected while the prior print was revised higher by 1k to 219k.

Weekly initial jobless claims fell once more with this metric continuing to show strength in the US labour market. Source: XTB Macrobond

In terms of market reaction, Gold has jumped a little higher in the past half an hour with price reaching its highest level of the day. Recent highs this week around 1218 remain a bridge too far for Gold longs at the moment, but the market is at least trying to form a base it appears, after some large declines. Lows around 1205 remain potentially key support.   

Gold remains near its lowest level in over a year but it seems to be trying to form a base. As long as support around 1204 holds then a recovery could lie ahead, although price really needs to get back above 1218 before Gold bugs can begin to hope for a sustained push higher. Source: XTB Macrobond