Market Recap: USD fell immediately after the PPI released but managed to bounced back soon after.

US major stock averages extended the rally on Tuesday after investors seized the softer-than-expected PPI data and bought the equity markets, S&P +0.87%, Dow +0.17% and NASDAQ +1.45%. Overnight, there was unconfirmed report of Russian missiles hitting a Polish village near the Ukraine border killing 2 people but Russia ’s defense ministry has denied that they have hit the Polish territory. Poland is unable to confirmed who launched the Russian-made missile but has invoked NATO article 4 with NATO allies, so as to bring the issue up to the table within the North Atlantic Council for discussion.

Market saw volatilities on the report but investors shook off the fear and risk tone improved towards end of session. US PPI came in at +8.0% vs +8.3% expected. New York Empire manufacturing index was 4.5 vs -5 estimate. Fed’s Bostic commented that the full impact on monetary policy would not be felt for months while Harker said that he does not want to move the interest rates way up and then way down. Harker added that as long as they are moving consistently to collapse inflation down, they can pause. The comments had analysts wondering if the Fed will tolerate higher inflation. In other markets, gold +$7.54, crude brent +$0.72 to $93.86, 2-Year Treasury yields -5.1 bps to 4.338% and US 10-Year Treasury yields -8.4 bps to 3.770%.

In currencies, CHF was the weakest while NZD lead the majors. USD fell immediately after the PPI released but managed to bounced back soon after. The USD index declined 0.24% to 106.40. The news on missile hitting Polish village brought EURUSD below 1.03 momentarily but EURUSD closed 0.2% higher. GBPUSD rallied steadily during London session and ended 0.9% higher. Commodity currencies saw better day, AUDUSD +0.8%, NZDUSD +1.0% and USDCAD -0.3%. USDJPY failed to cross above the 100-DMA( 1140.84) and close below the 1moving average at 139.28 .

Key economic releases for the day include UK CPI, RPI data, US MBA Mortgage Application, Retail Sales, Import Price Index, Industrial Production and Capacity Utilization.

This morning’s technicals suggest broad USD strength. EURUSD (R1.0568, S1.0170), GBPUSD (R1.2165, S1.1591), AUDUSD (R0.6857, S0.6635), NZDUSD (R0.6265, S0.6031) and USDJPY (R142.13, S136.25).

Source: Bloomberg