Summary:

• US PPI M/M rise to 0.3% from 0.2% prior (0.1% expected)
• Core reading M/M also increases to 0.3%
• Gold moving higher despite risk-on sentiment

It seems a long time ago now that markets were seemingly gripped by a fear of rising inflation when the rise in wages for the January NFP sent shockwaves around the globe. Whilst he concerns have receded somewhat in the months since inflation continues to be an important topic and some higher than expected readings today suggest that this could well become a bigger story again going forward.  

The US PPI M/M for March increased to 0.3% from 0.2% previously (0.2% expected) suggesting that price pressure are rising. Furthermore the core reading, which is viewed by some traders as a more accurate reflection of the underlying inflation also rose by more than expected, also coming in at 0.3% M/M (vs 0.2% expected and 0.2% prior). There has been a fairly clear uptrend in this inflation metric in recent years with both the headline and core prints showing steady gains.  

 

 Both the PPI and PPI core readings increased again in March, continuing the uptrend seen in recent years. Source: XTB Macrobond

The PPI is not normally associated with significant immediate moves in the markets, and this has been the case again today, but that’s not to say it should be dismissed out of hand. Wednesday’s CPI release typically garners far more attention and given the fairly strong correlation between these two there’s a fair chance we get a higher reading tomorrow and that could well see some larger moves.  

The US dollar has been falling back a little today, with the buck one of the weakest currencies and there’s been little by the way of a recovery despite the PPI beat. One market closely associated with US inflation is Gold and there’s been a steady bid behind the precious metal in the last few hours despite the risk-on sentiment seen elsewhere following Xi’s comments.

 Gold has edged above 1340 in the past hour despite the PPI data, with talk of a US reaction in Syria potentially seen as boosting the market. Source: xStation

 Gold has moved up above $1340 to trade at its highest level in almost a week despite the rise in PPI. One possible reason for this move could be reports that President Trump has cancelled a trip to South America to oversee the US response to Syria. We earlier mentioned how the latest chemical weapons attack in Syria was raising tensions in the Middle East and supporting the oil price, and should there be further escalation then the Gold market could be somewhere that it is keenly felt. 

It’s been a remarkably subdued start to the year for the Gold market with a $60 range from 1306-1366 containing price. Price has been in this range of less than 5% for over 3 months now and it appears that it could be coiling before making a breakout. Source: xStation