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U.S. Dollar and Stocks Volatile Ahead of PPI Data

Published 12/09/2022, 05:07 AM
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Investors have their eyes fixed on the Producer Price Index, which will be detrimental to the US Dollar and stock pricing. The US Dollar and equities have seen their price ranges altered due to weakening economic data and the likelihood of a lower rate hike.

However, the chances have slightly faded as data over the past week still support a higher rate hike. If the PPI and next week’s Consumer Price Index read higher than expected, the lower hike may be in doubt. As a result, the US Dollar may again rise while stocks decline.

Stocks over the past 24 hours and during the Futures Market have performed well and are pricing a low PPI figure. The Consumer Sentiment for the US is also expected to be released this afternoon. This can also affect the price, but as it is released on the same day as the PPI, it may have a limited effect.

Crude Oil

Crude oil prices remain under pressure from the decline in demand, and the price has again renewed its yearly lows. The price has declined to the lowest since Dec. 19, 2021. Some economists have advised that the price is returning to the normal price range, which has been experienced in the previous decades. One of the reasons for the decline in demand continues to be China and the general global market slowdown.

However, many factors may still support prices and spur another rally. Experts have advised that price caps from the G7 have already caused delays and disruptions. Traders are seeing disruptions in the Mediterranean and black sea.

In addition, the Keystone pipeline in the US is also likely to be shut for at least one week after leakages. It should also be noted that Turkey has been partially to blame for the delay after their new Tanker Insurance checks and regulation. So there are still plenty of concerns regarding supply that may change the price.

The list of countries slashing prices also keeps on rising. Russia is the latest to have slashed prices for China. According to Reuters, the discount was between $7-8 per barrel. Earlier this week, Saudi Arabia also discounted prices for China and Europe. This is sparking rumors that high oil-producing countries are worried about the decline in demand.

Crude oil price chart.

EUR/USD

The Head and Shoulder Pattern formed on Wednesday and Thursday had not materialized into a downward trend. Instead, the head and shoulder pattern formed a bullish breakout and a higher high. This is a bullish signal and did indeed trigger a 0.35% price increase. The price increased by 0.57% throughout the day.

EUR/USD price chart.

The exchange rate also increased during this morning’s Asian Session by a further 0.32%. However, the price has come under pressure as the price reached a previous resistance level. This is the previous point of collapse, which formed last Friday and this Monday. So far, the price is obtaining signals of a retracement and then a continuation of the bullish trend. However, traders should note that this afternoon’s PPI can change the price condition.

The PPI tracks inflation from the producer's point of view rather than the consumer's. However, the index is still vital for inflation, and the cost can be passed on to the consumer later. Both the Core PPI and PPI are expected to show a reading of 0.2% as of the previous month. A figure of 0.3% may not upset the Fed but may create some market volatility. However, above 0.3% would be negative from the Fed’s point of view.

Consumer Price Index, which is even more important than the PPI, is scheduled to be released on Tuesday. The CPI is expected to read 0.4%, and most economists have advised a figure of at least 0.6% would be required to turn the Federal Open Market Committee towards a 0.75% rate hike. Both announcements will likely largely determine the price of both the US Dollar and US equities throughout the month.

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