Jan

U.S. Core CPI, Empire State Manufacturing Index, FOMC Members Speak

15/01/2025 - 08:35 UTC

The US dollar fell against most major currencies on Tuesday, still hovering near its highest level over two years, with the USDX down by 0.42%. Cooler-than-expected producer price inflation initially supported the dollar, suggesting potential easing of inflationary pressures. However, this was tempered by a recent strong jobs report, raising concerns about continued economic growth and the potential for higher inflation. Investors appear to be scaling back expectations for aggressive interest rate cuts with attention now turning to the upcoming release of the consumer price index report, a key indicator of inflation.

Wall Street painted a mixed picture on Tuesday following a cooler-than-expected producer price index report which helped ease concerns about rising inflation, leading to a decline in Treasury yields. The producer price index for the United States registered a slower-than-projected increase of 0.2% on a month-over-month basis in December. Economists had anticipated a reading consistent with the prior month's 0.4% growth.

The upcoming earnings season kicks off on Wednesday with reports expected from several major Wall Street banks, including JPMorgan Chase, Wells Fargo, Goldman Sachs, and Citigroup. In other market news, Lululemon Athletica shares declined by 2.5% despite the company raising its holiday outlook for both earnings and revenue.

Oil prices declined on Tuesday, with WTI and Brent losing 1.14% and 0.82% of their values respectively after the American Petroleum Institute reported a smaller-than-expected decline in weekly domestic crude stockpiles. U.S. crude inventories fell by about 2.6 million barrels for the week ended Jan. 10, compared with a draw of 4M barrels reported by the API for the previous week. Economists were expecting a draw of 3.5M barrels.

On the cryptos front Ripple’s legal battle is in the spotlight as it enters a critical phase. The SEC must file its appeal-related opening brief today and speculation has intensified over whether the SEC will challenge the Programmatic Sales of XRP ruling, a critical decision that impacts the classification of XRP as a security.

For Wednesday markets will most likely be focusing on the U.S. Core CPI data, the Empire State Manufacturing Index and speeches from FOMC members Kashkari and Barkin. For the week ahead, attention could shift to U.S. retail sales, U.S. Jobless Claims, the Philly Fed manufacturing index, the U.S. building permits and U.K. growth data.

EUR/USD

The EUR/USD pair posted moderate gains on Tuesday ending the session 0.41% higher as optimism among Euro bidders grew. Hopes that a potential agreement in France could avert a governmental collapse provided a significant boost to the Euro. Improved market sentiment further supported the pair, fueled by softer-than-expected US Producer Price Index (PPI) inflation figures.

In the US, headline PPI inflation climbed to 3.3% year-over-year in the latest report, up from 3.0%, while core PPI edged higher to 3.5% from the previous 3.4%. The numbers remain well above the Federal Reserve’s annual targets, suggesting minimal change in the outlook for potential rate cuts.

Looking ahead to Wednesday, US Consumer Price Index (CPI) data is in focus. This upcoming data release is likely to influence market expectations for future monetary policy decisions.

Gold

Gold prices edged higher on Tuesday, supported by US data showing cooler-than-expected producer price inflation. This development has buoyed traders' hopes for potential monetary policy easing by the Federal Reserve.

Meanwhile, geopolitical developments have added complexity to the market outlook. Kansas City Fed President Jeffrey Schmid noted that the Fed stands ready to act if trade policies disrupt inflation or employment. President-elect Donald Trump’s inauguration, just six days away, has brought uncertainty to the fore, with threats of sweeping tariffs raising concerns about potential trade wars and their inflationary impact.

WTI Oil

Oil prices declined on Tuesday following a forecast by a US government agency projecting steady domestic oil demand in 2025 and a slight increase in supply expectations. However, losses were tempered by the introduction of new US sanctions targeting Russian oil exports to India and China.

On Tuesday, the US Energy Information Administration (EIA) released its latest forecast, predicting US oil demand would remain steady at 20.5 million barrels per day (bpd) in 2025 and 2026.

While analysts anticipate a significant impact on Russian oil supplies from the new sanctions, the actual effect on the physical market may be less severe than expected.

US 500

The US 500 and US Tech 100 slipped on Tuesday in a volatile session as investors assessed inflation data and prepared quarterly earnings reports to evaluate stock valuations and the health of the US economy.

Markets initially found support after the US Labor Department reported that the Producer Price Index (PPI) rose less than expected in December. However, the report had little impact on expectations for the Federal Reserve’s monetary policy direction in 2025.

Attention now shifts to Wednesday’s Consumer Price Index (CPI) data, which will be pivotal in shaping inflation expectations and gauging the Fed’s next moves.

Earnings season kicks off Wednesday, with major banks set to report quarterly results. Analysts expect robust profits driven by strong dealmaking and trading activity.

U.S. Core CPI, Empire State Manufacturing Index, FOMC Members Speak

EUR/USD

Gold

WTI Oil

US 500

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