Dollar firmer
Yesterday’s Blog noted that US producer price inflation data would garner attention following firmer than forecast consumer price inflation data released earlier in the week. In the event, another set of stronger than forecast numbers sparked a (US-led) rise in bond yields and a strengthening of the dollar. The latter has gained around three quarters of a cent or so against the euro and sterling to leave it trading at about $1.0880 and $1.2740 this morning, with EURGBP still hovering in an around £0.8550.
US 2-and 10-year bond yields rose by 5bps and 10bps respectively (bringing the increase week to date for both to around 20bps), while equivalent German and UK yields increased by slightly less. Higher yields halted the gains in equity markets, with US and European stocks ending slightly lower on the day.
The annual rate of producer output price inflation in the US rose to 1.6% in February, up from 1% in January and ahead of the consensus forecast of 1.2%, while core producer price inflation (i.e. excluding energy and food prices) remained at 2% albeit slightly ahead of forecast. The latest retail sales data, meanwhile, came in softer than forecast, though this was ignored by the market. The value of sales rose by 0.6% last month, only partially reversing a fall of 1.1% in January, while over the three months to February sales were down around 0.5% from the three months to October last year.
ECB member Ollie Rehn is the latest to add his voice in favour of a June cut in interest rates, saying “we will be able to gradually start taking the foot off the monetary policy brake when the summer nears” as Euro area inflation is forecast to be nearing the 2% target this year and next.
The annual rate of CPI inflation in Ireland fell to 3.4% in February from 4.1% in January, while HICP inflation fell to 2.3% from 2.7%, below the Euro area rate of 2.6%.
There’s more inflation data due in the US today, with import prices and the University of Michigan’s consumer confidence / inflation expectations survey both scheduled for release.