Dollar and Yield Dip after CPI, Stocks Rebound

Market overviews

Dollar drops in early US session together with treasury yields after consumer inflation data. While headline CPI came in higher than expected, core CPI’s pick up missed expectations. Commodity currencies are trading generally higher as US futures point to a rebound in major stock indexes. European majors are also attempting a recovery but momentum is relatively weak. Yen is trading is tight range, consolidating recent losses.

Technically, a focus is now on whether USD/JPY would correct from current level, after rejection by 125.85 long term resistance. Bring of 124.66 minor support will bring deeper pull back. But overall, there shouldn’t be any change in the up trend. Any retreat should be contained above 121.27 support, to bring another attempt on 125.85 resistance.

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

US CPI rose to 8.5% yoy, core CPI rose to 6.5% yoy, highest since early 80s

US CPI rose 1.2% mom in March, above expectation of 1.1% mom. CPI core rose 0.3% mom, below expectation of 0.5% mom.

For the 12-month period, CPI accelerated from 7.9% yoy to 8.5% yoy, above expectation of 8.3% yoy. That’s the highest annual rate since December 1981.

CPI core ticked up from 6.4% yoy to 6.5% yoy, below expectation of 6.6% yoy. That’s the fastest 12-month increase since August 1982.

Energy index rose 32.0% yoy while goods index rose 8.8% yoy, largest 12-month increase since May 1981.

Germany ZEW economic sentiment dropped to -41, prospect of stagflation over…

Germany ZEW Economic Sentiment dropped from -39.3 to -41 in April, but was better than expectation of -48. Current Situation Index dropped from -21.4 to -30.8, above expectation of -35.0. Inflation expectations dropped -43.4 pts to 26.8.

Eurozone ZEW Economic Sentiment dropped from -38.7 to -43.0, above expectation of -46.5. Current Situation index dropped -6.6 pts to -28.5. Inflation expectations dropped -43.6 pts to 25.9.

“The ZEW Indicator of Economic Sentiment remains at a low level. The experts are pessimistic about the current economic situation and assume that it will continue to deteriorate. The decline in inflation expectations, which cuts the previous month’s considerable increase by about half, gives some cause for hope. However, the prospect of stagflation over the next six months remains,” comments ZEW President Achim Wambach.

UK payrolled employees rose 35k in Mar, unemployment rate dropped to 3.8% in Feb

UK payrolled employees rose 35k in March, comparing to February. Number of payrolled employees were 544k or 1.9% above prepandemic level in February 2020. Claimant count dropped -46.9k, larger than expectation of -41.1k.

In the three months to February, unemployment rate dropped to 3.8% matched expectations. That’s -0.2% lower than the previous three-month period, and -0.1% below pre-pandemic levels. Average earnings including bonus rose 5.4% over the year, below expectation of 5.7%. Average earnings excluding bonus jumped 4.0% over the year, above expectation of 3.7%.

Japan PPI rose 7.3% yoy in Mar, index at highest level since 1982

Japan corporate goods price index rose 7.3% yoy in March, slowed from 9.7% yoy but beat expectation of 9.3% yoy. The March index, at 112.0, was the highest level since December 1982. The yen-based import price index surged 33.4% yoy, signaling that Yen’s depreciation could be amplifying 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. That includes the impact on the Japanese economy.”

Australia NAB business confidence rose to 16, strong rebound led by consumer demand

Australia NAB business confidence rose from 13 to 16 in March. Business conditions rose from 9 to 18. Looking at some details, trading conditions rose from 11 to 24. Profitability conditions rose from 5 to 13. Employment conditions rose from 8 to 12.

“A surge in business conditions headlined a really strong March survey,” said NAB Group Chief Economist Alan Oster. “Businesses reported very strong trading conditions and a sharp rise in profitability, which indicates demand is continuing to hold up as the economy rebounds from Omicron and growth gathers momentum.”

“Business confidence continued to improve in March, with little evidence of any adverse impact from events in Ukraine,” said Oster. “The outlook also strengthened in terms of forward orders which points to ongoing economic growth over coming months.”

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

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.9287; (P) 0.9329; (R1) 0.9355; More….

Intraday bias in USD/CHF remains neutral for the moment. On the upside, firm break of 0.9380 should confirm that fall from 0.9459 has completed with three wave down to 0.9193. Such development will revive near term bullishness and turn bias back to the upside for 0.9459 and then 0.9471 resistance. On the downside, below 0.9280 minor support will turn bias to the downside for 0.9193 support next.

In the bigger picture, medium term outlook will be neutral at best as long as 0.9471 resistance holds. Larger down trend could still extend through 0.8756 (2021 low). However, firm break of 0.9471 will argue that whole down trend form 1.0342 (2016 high), has completed with waves down to 0.8756. A medium term up trend should be set up to target 1.0237/0342 resistance zone.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
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 Lending Y/Y Mar 0.50% 0.50% 0.40%
23:50 JPY PPI Y/Y Mar 9.50% 9.30% 9.30% 9.70%
01:30 AUD NAB Business Confidence Mar 16 13
01:30 AUD NAB Business Conditions Mar 18 9
06:00 GBP Claimant Count Change Mar -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 Bonus 3M/Y Feb 5.40% 5.70% 4.80%
06:00 GBP Average Earnings Excluding Bonus 3M/Y Feb 4.00% 3.70% 3.80%
06:00 EUR Germany CPI M/M Mar F 2.50% 2.50% 2.50%
06:00 EUR Germany CPI Y/Y Mar F 7.30% 7.30% 7.30%
06:45 EUR France Trade Balance (EUR) Feb -10.3B -9.3B -8.0B
09:00 EUR Germany ZEW Economic Sentiment Apr -41 -48 -39.3
09:00 EUR Germany ZEW Current Situation Apr -30.8 -35 -21.4
09:00 EUR Eurozone ZEW Economic Sentiment Apr -43 -46.5 -38.7
10:00 USD NFIB Business Optimism Index Mar 93.2 95 95.7
12:30 USD CPI M/M Mar 1.20% 1.10% 0.80%
12:30 USD CPI Y/Y Mar 8.50% 8.30% 7.90%
12:30 USD CPI Core M/M Mar 0.30% 0.50% 0.50%
12:30 USD CPI Core Y/Y Mar 6.50% 6.60% 6.40%