Fed’s policymakers expressed the need to tighten policy further despite slower inflation
Following an encouraging CPI earlier in the week, fresh data showed on Thursday that the July producer price index showed a surprise decline last month. The index dropped 0.5% versus the expected gain of 0.2%. also, the PPI reading excluding food and energy rose less than expected in July. However, the release failed to inspire investors as Wall Street stocks finished mixed overnight, losing the early steam. The S&P 500 closed down 0.07%, the Nasdaq Composite slumped 0.58% and the Dow Jones added less than 0.1%.
Asian equity markets mostly fell on Friday, tracking losses in the US stocks amid some uncertainty over how hawkish the Fed would hike rates in September. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.10% while the Nikkei 225 in Tokyo bucked the trend to rally nearly 2.5% as markets reopened following a national holiday. The Shanghai Composite shed 0.15%. In individual stocks, China’s largest chipmaker Semiconductor Manufacturing International Corporation reported a 25% drop in net profit in the second quarter of 2022 while revenue grew 42%.
European stocks opened in a subdued manner on Friday amid persisting uncertainty surrounding the extent of future Fed rate hikes as the central bank’s policymakers expressed the need to tighten policy further despite slower inflation. On the data front, the UK economy contracted 0.6% in June, a sharp drop from the 0.5% growth seen in the previous month.
The US dollar has steadied around the 105.00 figure on Friday after another drop to the 104.65 support zone yesterday. The buck struggled to regain the upside bias amid signs of slowing inflation in the United States. Against this backdrop, EURUSD regained the 1.0300 figure but failed to overcome the 1.0370 resistance zone earlier in the week. As such, the shared currency lacks recovery momentum despite dollar’s weakness, suggesting the pair remains vulnerable at this stage.
