PPI Numbers Lead To Dollar Sell-off
U.S. Treasury 10-year notes rose the most in a month today
after the PPI report showed a slowing inflation. Core producer prices fell
0.3%, compared to a projected 0.2% increase. Although bonds rose sharply
on the inflation data released today, tomorrow’s consumer price index report is
considered to be more important in determining the true inflationary situation.
If inflation is seen to be contained in tomorrow’s report, investors would be
more secure in a bond move to the upside.
The dollar fell the most in over two weeks today against the
yen and euro after the PPI report showed that inflation might not be a problem
for the Fed. Without inflation, the Fed has no need to raise rates in the
next meeting, which would hurt the dollar on the global market. Japan and
Europe are both expected to raise rates before the year is out, bearish news for the dollar. The dollar has
fallen 7.4% for the year against the euro and 1.5% for the year against the yen.
A separate report showed an increase in foreign investments into the US, but
investor action revolved around the PPI numbers. The CPI report due out
tomorrow will give investors more data for wagers on a Fed increase in
September.
Crude oil futures fell 0.6% to close at $73.10 after the
second day of ceasefire in the Middle East eased supply concerns.
Investors have been closely following the war in Lebanon since it began, afraid
that an escalation could lead to Iran’s involvement. Natural gas traded
with fractional change.
The metals fell across the board with the energies. Gold
dropped nearly 1%, silver fell 0.6% and copper dropped 0.3%. Aluminum
stood out as a winner today, closing up 0.3%.
Softs traded mixed today. Cocoa was up 0.25%, coffee
rose 2%, orange juice dropped fractionally and sugar rose 2.3%.
The grains traded flat to mixed today. Corn traded flat,
wheat rose 0.75%, soy traded flat and oats rose 0.3%.
Meats traded mixed, with cattle down fractionally and
potbellied pigs up 2.5%.
Core Wholesale Prices Fall Unexpectedly In July (full
story).
John Patrick Lee