US recap: EUR/USD soars toward 2023’s peak as US CPI dims Fed fears

April 12 (Reuters) – The dollar index fell roughly 0.6% on Wednesday after March US CPI came in slightly softer than forecast, though losses were kept in check after Fed speakers reminded markets that further tightening is possible if core inflation doesn’t proceed sustainably toward target.

Minutes from the Fed’s March meeting showed concern regarding the banking crisis but also viewed it as contained, leaving inflation the top priority.

Treasury yields and the dollar slipped slightly after the minutes, as some worry the Fed’s 25bp hike was meant to project a business-as-usual message to markets still weighing banking and credit risk.

EUR/USD rose 0.74% as the ECB remains favored to hike rates by at least 75bp into year-end versus the Fed not fully priced to hike 25bp in May before roughly 50bp of cuts by December.

EUR/USD’s rally to 1.1005 on EBS neared February’s 1-year highs at 1.1034 and threatens the first weekly close above the 100-week moving average, now at 1.0949, since October 2021.

If US PPI, claims and retail sales on Thursday and Friday further dim Fed tightening prospects and reinforce 2-year bund-Treasury yield spreads, already at their least negative since November 2021, EUR/USD could move sharply higher.

Sterling rose 0.5%, nearing April’s 1.2525 10-month highs. If upcoming US data favor a more cautious Fed, cable’s bullish medium-term technical outlook and further BoE rate hikes, clearly appropriate with UK inflation still above 10%, could carry prices far higher.

USD/JPY fell 0.42% after recovering some of its initial post-CPI plunge in line with tumbling Treasury yields. Two-year Treasury yields are down 9bp, but 4bp off the day’s lows.

USD/JPY now needs hawkish US data to get a bullish close above the pivotal 133.77 level.

(Editing by Burton Frierson; Randolph Donney is a Reuters market analyst. The views expressed are his own.)

Gold shines as bets for US rate hike pause gather pace

April 12 (Reuters) – Gold prices jumped on Wednesday as signs of cooling inflation bolstered bets that the US Federal Reserve may pause its policy tightening after a likely interest rate hike in May.

Spot gold was up 0.6% at USD 2,014.39 per ounce by 2:10 p.m. EDT (18:10 GMT), after rising as much as 1.3% earlier. US gold futures settled 0.3% higher at USD 2,024.90.

The Consumer Price Index (CPI) climbed 0.1% in March after advancing 0.4% in February. But in the 12 months through March, the core CPI gained 5.6%, after rising 5.5% on the same basis in February.

“The risks of not raising rates enough far exceeds over-tightening so the Fed is probably going to go forward with the quarter-point rate hike, the core justifies it,” said Edward Moya, senior market analyst at OANDA.

“There’s still a tremendous amount of risk on the table, so gold should still see some strong flows headed its way.”

Gold drew strength from a slide in the dollar and benchmark US yields.

Markets are now pricing in a 69% chance of a 25-basis-point rate hike in the May meeting, followed by 2-to-1 bets of a pause in June.

While gold is seen as a hedge against inflation, higher rates to tame rising price pressures weigh on the non-yielding asset’s appeal.

Several officials at the Fed’s meeting last month considered pausing interest rate increases over concerns of wider financial stress from the failure of two US regional banks, but they concluded that high inflation remained the priority, minutes showed.

Whether the Fed will slow its rate hikes “largely depends on the confirmation of economic cooling indicators, such as a potential deterioration in the US job market,” said Alexander Zumpfe, a precious metals dealer at Heraeus.

Silver gained 1.5% to USD 25.45 per ounce, platinum added 2.5% to USD 1,019.22 and palladium rose 1.6% to USD 1,469.52.

(Reporting by Deep Vakil and Seher Dareen in Bengaluru; editing by Jonathan Oatis, Shilpi Majumdar and Shweta Agarwal)

Europe’s blue-chip index hits 22-year high, US inflation eases

April 12 (Reuters) – Europe’s blue-chip stocks hit their highest in 22 years on Wednesday as investors sought mega-cap quality stocks and as investors weighed whether the Federal Reserve could pause its rate hikes after evidence of cooling US inflation.

The blue-chip STOXX 50 index touched its highest since 2001 prior to the inflation data, but came off that level later, eking out only marginal gains for the day.

The pan-European STOXX 600 index ended 0.1% higher, also having chopped early gains.

A US Labor Department report showed the Consumer Price Index climbed 0.1% last month after advancing 0.4% in February. The core CPI, however, gained 5.6% year-on-year last month after rising 5.5% in February.

While the data had fueled hopes of a pause in rate hikes, leading to a rally in global markets earlier in the day, analysts cautioned the headline figure remained above the Fed’s target and the central bank is likely to press forward with a 25-bp rate increase at its May meeting.

“If we look at the headline inflation, it was good of course, but the core CPI is still quite sticky. So probably it’s too soon to stop the hiking cycle of the Fed,” said Michele Morra, Portfolio Manager at Moneyfarm.

European Central Bank officials also have been voicing concerns about sticky inflation, with Austrian Central Bank chief Robert Holzmann telling a German newspaper that another 50 basis point rate hike may be needed in May.

Rate-sensitive real estate stocks were the top sectoral gainers on the STOXX 600 on Wednesday, rising 1.1%, while travel and leisure and technology stocks limited gains.

Defensive healthcare and utilities shares were a big boost to the blue-chip STOXX 50.

Investors are still digesting the International Monetary Fund’s warning that lurking financial system vulnerabilities could erupt into a new crisis and slam global growth this year.

Luxury group LVMH (LVMH), Europe’s most valuable company, is due to report first-quarter sales after markets close.

Shares of AB Volvo (VOLVb) jumped 7.4% as the truck-maker reported record first-quarter profit on higher revenue and margins.

Mercedes-Benz Group (MBGn) gained 1% after its first quarter sales rose on a boost from electric vehicles and premium cars.

Germany’s Merck (MRCG) slid to the bottom of the STOXX 600, falling 7.4%, after the US health regulator paused the initiation of new patients on the company’s evobrutinib drug.

(Reporting by Shubham Batra and Amruta Khandekar in Bengaluru; Additional Reporting by Sruthi Shankar; Editing by Sonia Cheema, Arun Koyyur, William Maclean)

Rupee edges up as dollar softens ahead of US inflation data

MUMBAI, April 12 (Reuters) – The Indian rupee made slim gains against the US dollar on Wednesday, as the greenback slipped ahead of a crucial US inflation report that could influence the Federal Reserve’s next policy move.

The rupee was trading at 82.0750 per dollar by 10:44 a.m. IST compared with 82.1250 in the previous session.

Asian currencies were mostly higher, while the dollar index extended losses ahead of March US consumer price index data. Core CPI, in focus, likely rose by 0.4% month-on-month in March, according to economists polled by Reuters.

That would be down from the 0.5% increase in February, but well above the pace required for bringing annual inflation to Fed’s 2% target. Headline inflation is expected to rise 0.2%.

Following the robust jobs report, investors have increased their bets of a 25 bps points hike by the Fed at the May meeting to 70%.

There is a lot of risk ahead of the event as this is the last major data release before the Fed’s May 2-3 meeting, said Gaurang Somaiya, FX and bullion analyst at Motilal Oswal Financial Services.

“A soft inflation reading has been priced in by the markets, but in case of slightly contrary data, there could be a major reaction”.

India’s headline inflation probably eased in March to 5.80%, dipping below the Reserve Bank of India’s upper tolerance limit of 6% for the first time this year, according to a Reuters poll.

The data, also due later in the day, follows the RBI’s surprise move last week to hold its key interest rate at 6.50%, after which USD/INR forward premiums have been on a declining trend.

The 1-year implied yield fell a further 3 bps to 2.34%, down over 20 basis points since last Thursday.

(Reporting by Nimesh Vora; Editing by Nivedita Bhattacharjee)

Dollar slips ahead of US inflation data, still hits month high against yen

SINGAPORE, April 12 (Reuters) – The dollar dipped on Wednesday against most major currencies, with the exception of the yen, with investors expecting US inflation data out later in the global day to hold some clue on how soon US interest rates will peak.

Against a basket of currencies, the US dollar index fell 0.07% to 102.05.

The euro was last 0.12% higher at USD 1.0926 and sterling rose 0.02% to USD 1.2430, with both currencies some distance away from their one-week lows hit on Monday.

The US inflation data for March is forecast to come in at 5.2% year-on-year, down from 6.0% previously, while core inflation likely ticked higher to 5.6%, according to a Reuters poll of economists.

“It could be the difference between a 25bp hike or pause at the Fed’s next meeting in May,” said Matt Simpson, senior market analyst at City Index, adding that money markets could “quickly revert to reprice a policy pause” if the inflation data comes in softer than expected.

Money markets are pricing in a roughly 74% chance that the Fed will raise rates by 25 basis points next month, though multiple rate cuts are also being priced in as early as July through to the end of the year.

A raft of Fed speakers on Tuesday offered little guidance on how much further US interest rates would rise. New York Fed President John Williams said it depended on incoming data.

Philadelphia Fed Bank President Patrick Harker said he felt that the end of rate hikes may be near, while Chicago Fed President Austan Goolsbee said that the US central bank should be patient about raising interest rates in the face of recent banking sector stress.

Banking turmoil sparked by the collapse of Silicon Valley Bank last month has added to bets that the Fed would not raise rates as high as previously feared in order to ease stress on the sector.

Against the yen, the dollar rose to a nearly one-month high of 134.045, a reflection of the stark contrast between the Fed’s aggressive monetary policy tightening cycle and the Bank of Japan’s (BOJ) ultra-loose policy.

The International Monetary Fund said in its global financial stability report released on Tuesday that the Bank of Japan could help prevent abrupt policy changes later by allowing more flexibility in its yield curve control policy.

Elsewhere, the Aussie rose 0.32% to USD 0.6675, while the kiwi gained 0.19% to USD 0.6204.

In cryptocurrencies, bitcoin slipped marginally to USD 30,001, holding above the key USD 30,000 level after breaching it for the first time in 10 months on Tuesday.

Ether, the second largest cryptocurrency, stood at USD 1,867.90.

PH raises USD 454M from 2032 T-bond re-issue

MANILA, April 12 (Reuters) – Following are the results of the Philippine Bureau of the Treasury’s (BTr) auction for 2032 T-bond re-issue on Wednesday:

* BTr fully awards PHP 25 billion (USD 454.4 million) offer

* Average yield 6.142%

* Tenders total PHP 44.492 billion]

* Bonds originally issued in September 2022

* Details on the BTr’s website

(USD 1 = PHP 55.0200)

(Reporting by Enrico Dela Cruz; Editing by Jacqueline Wong)

Oil edges up as market awaits key US inflation data

April 12 (Reuters) – Oil prices edged up on Wednesday as the market waited for US inflation data later in the day that will likely influence the Federal Reserve’s policy on future interest rate hikes.

Brent crude gained 19 cents, or 0.2%, to USD 85.80 a barrel as of 0615 GMT, while US West Texas Intermediate rose 13 cents, or 0.2%, to USD 81.66 a barrel.

Prices had risen about 2% on Tuesday amid optimism that the US Federal Reserve is getting closer to ending its cycle of interest rate hikes, making dollar-priced oil cheaper for buyers holding other currencies.

The US consumer price index is expected to show March core inflation rose 0.4% on a monthly basis and 5.6% year-on-year, according to a Reuters poll of economists.

Philadelphia Federal Reserve Bank President Patrick Harker said on Tuesday that he feels the US central bank may soon be done raising interest rates, while Minneapolis Federal Reserve Bank President Neel Kashkari said he believes inflation, now at a rate of 5% by the Fed’s preferred measure, will get to “the mid-threes” by the end of this year.

Yeap Jun Rong, a market analyst at IG said in a note to clients, however, that any “higher-than-expected inflation print could lay the ground for another 25 basis-point rate hike in June”.

Meanwhile, data from the American Petroleum Institute (API) showed crude inventories rose by about 380,000 barrels in the week ended April 7, sources said, against forecasts from eight analysts polled by Reuters for a decline of 600,000 barrels.

At the same time, gasoline inventories rose by about 450,000 barrels, according to the API report, while analysts had expected a 1.6 million-barrel drawdown.

The US government will release its stockpile data at 10:30 a.m. (1430 GMT) on Wednesday.

In another negative for oil demand, the International Monetary Fund on Tuesday trimmed its 2023 global growth outlook, citing the impact of higher interest rates.

In addition to the inflation data, the market is waiting for more clarity on oil demand and supply with monthly reports from the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency due on Thursday and Friday respectively.

The US Energy Information Administration on Tuesday cut its forecast for oil production by OPEC countries by 0.5 million barrels-per-day for the rest of 2023 and cut its 2023 world oil demand growth forecast by 40,000 bpd.

(Reporting by Muyu Xu and Arathy Somasekhar; Editing by Sonali Paul and Edwina Gibbs)

((arathy.s@thomsonreuters.com; +1 832 208 3362; Twitter: @ArathySom))

Oil rises 2% on lower-than-expected US inflation data

HOUSTON, April 12 (Reuters) – Oil prices rose 2% on Wednesday to their highest in more than a month as cooling US inflation data spurred hopes that the Federal Reserve is getting closer to ending its cycle of interest-rate hikes and cushioned the impact of a small build in US crude oil stocks.

Brent crude settled up USD 1.72, or 2.01%, at USD 87.33 a barrel, its highest since late January, while US West Texas Intermediate closed up USD 1.73, or 2.1%, to USD 83.26, its highest in five months. Prices rose about 2% on Tuesday.

The US Consumer Price Index (CPI) climbed 0.1% last month after advancing 0.4% in February, the Labor Department said. In the 12 months to March 31 the CPI increased 5%, the smallest year-on-year gain since May 2021.

“The weaker US CPI print has raised doubts over whether the Fed will now hike rates at all next month,” said Fawad Razaqzada, market analyst at brokerage StoneX. “Falling interest-rate expectations is reducing recession concerns and helping to support buck-denominated asset prices at the same time.”

US President Joe Biden’s top economic adviser and ex-Federal Reserve vice chair, Lael Brainard, also said she was seeing inflation coming down.

The dollar dropped sharply after the data. A weaker US currency makes dollar-priced oil cheaper for buyers holding other currencies.

Hedge fund were buying oil futures in the market over the past few days in anticipation of improving demand, said Dennis Kissler, senior vice president of trading at BOK Financial.

Markets shrugged off a small build in US crude oil stocks, attributing it in part to a congressionally mandated release of oil from the US emergency reserve and lower exports at the start of the month.

Crude inventories rose by 597,000 barrels in the last week to 470.5 million, compared with analysts’ expectations in a Reuters poll for a 600,000-barrel drop. Gasoline and distillate stocks drew less-than-expected.

A report from the American Petroleum Institute (API) showed crude inventories rose by about 380,000 barrels in the last week, while gasoline inventories were also higher, according to sources.

Meanwhile, the global oil market could see tightness in the second half of 2023, which would push oil prices higher, said Fatih Birol, executive director of the International Energy Agency.

The top US shale basin has not seen peak production, Occidental Petroleum Chief Executive Vicki Hollub said, while Pioneer Natural Resources chief executive Scott Sheffield said Wednesday that if oil prices break above USD 90 per barrel, then prices will likely reach USD 100 per barrel this year.

In a negative for oil demand, the International Monetary Fund on Tuesday trimmed its 2023 global growth outlook, citing the impact of higher interest rates.

The market is also waiting for clarity on oil demand and supply, with monthly reports from the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency due on Thursday and Friday, respectively.

(Reporting by Arathy Somasekhar in Houston; Additional reporting by Muyu Xu and Ahmad Ghaddar; Editing by Kirsten Donovan, Matthew Lewis, Leslie Adler and Daniel Wallis)

Calm before the US inflation storm

April 12 (Reuters) – The world is bracing for US inflation figures on Wednesday, but before that Asia gets to digest a mixed performance on Wall Street, another creep up in US bond yields, and a major inflation report of its own.

Indian consumer price inflation for March tops a regional economic calendar on Wednesday which also includes Indian industrial production, South Korean unemployment, and corporate goods inflation and machinery orders from Japan.

These releases come against a backdrop of global stock markets still maintaining a glass-half-full outlook despite the growth picture fraying at the edges and bond yields continuing a steady creep higher.

Asian stock markets, in particular, are holding firm – the MSCI Asia ex-Japan index rose 0.6% on Tuesday, its third consecutive increase and its best performance this month.

The US CPI inflation report for March will go a long way to determining what the Fed decides at its May 2-3 policy meeting. Markets expect headline inflation to continue slowing but are still shifting towards pricing in another quarter point rate hike.

India’s consumer inflation, meanwhile, likely eased in March to 5.80%, thanks to softer food price rises, dipping below the Reserve Bank of India’s upper tolerance limit of 6.00% for the first time this year.

The data comes less than a week after the RBI surprised markets by holding its key interest rate steady at 6.50% when most expected a 25-basis-point rise.

South Korean unemployment in February fell back to match last August’s record low of 2.6%, so a further decline in the March reading would break new historic ground.

Finance ministers and central bank officials from around the world are in Washington for this week’s International Monetary Fund and World Bank spring meetings.

The IMF on Tuesday trimmed its global growth outlook for this year and next as higher interest rates bite, and warned that the risk of “perilous” financial turmoil could slash output to near recessionary levels.

The global lender kept its Chinese growth forecasts at 5.2% and 4.5%, respectively, but lowered its 2023 Indian GDP growth forecast by a fifth of a percentage point to 5.9% and next year’s outlook by half a point to 6.3%.

US Treasury Secretary Janet Yellen was more optimistic about global economic growth and warned against overdoing the ‘negativism’. She also said she still hopes to visit China, underscoring President Joe Biden’s focus on opening up and maintaining channels of communication with Beijing.

Here are three key developments that could provide more direction to markets on Wednesday:

– IMF/World Bank spring meetings in Washington

– India CPI inflation (March)

– US CPI inflation (March)

(By Jamie McGeever; Editing by Deepa Babington)

Gold climbs as dollar pauses ahead of US inflation data

April 11 (Reuters) – Gold climbed back up above the key $2,000 level on Tuesday as the dollar came off last session’s peak, while traders hunkered down for Wednesday’s U.S. inflation data for cues on future interest rate hikes.

Spot gold rose 0.8% to $2,005.79 per ounce by 2:00 p.m. EDT (1800 GMT) while U.S. gold futures settled 0.8% higher at $2,019.00.

Bullion found some respite from a pause in the dollar, following a bounce in the previous session, also helping offset pressure from higher Treasury yields.

“At this stage of the game, the market isn’t particularly fussed on whether we get another 25 basis points” from the Federal Reserve in May, said Bart Melek, head of commodity strategies at TD Securities.

“The market is looking at the pivot and signaling lower rates as we move deeper into the second half of 2023.”

The prospect of the Fed raising its benchmark interest rate only once more by 25 basis points is a useful starting point, said New York Fed President John Williams, while Chicago Fed President Austan Goolsbee said the central bank should be cautious about raising interest rates in the face of recent banking stress.

Gold shed nearly 1% on Monday after strong U.S. jobs data on Friday raised the chances of a May rate hike to around 70%.

The U.S. consumer price index (CPI) data on Wednesday could yield signs on how long the Fed would continue its campaign against inflation.

“Should CPI push higher and support monetary policy tightening after strong non-form payroll figures, real yields may turn higher thus increasing the opportunity cost of holding gold,” DailyFX analyst Warren Venketas wrote in a note.

Central banks should not halt their fight against inflation because of financial stability risks, IMF chief economist Pierre-Olivier Gourinchas said.

Silver was up 0.8% to $25.08 per ounce, platinum gained 0.6% to $997.20 while palladium jumped 3% to $1,454.17.

(Reporting by Deep Vakil in Bengaluru; Editing by Christina Fincher, David Holmes and Krishna Chandra Eluri)

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