Sour Investor Mood Ahead of U.S. PPI Release – Currency Thoughts

Sour Investor Mood Ahead of U.S. PPI Release

March 13, 2025

U.S. equities got only a dead-cat bounce from Wednesday’s slightly better-than-expected consumer price data and are back showing red ahead of producer price figures due shortly. With his assortment of U.S. policy about-faces, President Trump has acquired a Grinch-like aura in the world financial community. At this writing,

• The dollar is down 0.2% against the yen and sterling but up by 0.6% versus the Australian, Turkish and New Zealand currencies, 0.2% relative to the euro and 0.1% vis-a-vis the Canadian dollar and Swiss franc.
• Ten-year sovereign debt yields since Wednesday’s close have climbed by four basis points in Italy, three bps in Spain and France, and two bps in Germany, the U.S. and Great Britain.
• Equity markets in the Pacific Rim today fell 1.4% in Taiwan, 0.6% in Hong Kong, 0.5% in Australia, 0.4% in China and 0.3% in India and Indonesia. The German DAX is 0.4% lower.
• The price of Bitcoin sank 1.1% overnight. Oil and gold have firmed 0.5% and 0.3%.

Policy interest rates at the National Bank of Poland and National Bank of Serbia have been left unchanged at 5.75% each. The latest reading of Polish CPI inflation, 5.3%, exceeds that country’s target corridor of 1.5-3.5%. Two rate reduction totaling a percentage point were implemented last September and October, and 5.75% currently is at its lowest level since May 2022. Today’s statement from the NBP warns that “the outlook for economic activity and inflation around the world is fraught with uncertainty, which is related to, among others, changes in trade polices.” Monetary authorities also worry about “the impact of elevated inflation on inflation expectations and wage pressure – especially amid a rising demand and low unemployment.”

In Serbia’s case, three 25-basis point interest rate reductions were undertaken last June, July and September following an 11-month interval when the key rate had crested at 6.5%. Consumer price inflation, which peaked at 16.2% in March 2023 dropped as low as 3.8% by May 2024 but then climbed to a 9-month high of 4.6% in January. Last month saw inflation slip back to 4.5%, and unlike Poland’s current situation, 4.5% in Serbia remains within the targeted range of 1.5-4.5%. Nonetheless, several uncertainties argue in favor of a cautious approach to anymore easing. Upside inflation risks include “ongoing geopolitical tensions, growing protectionism, trade policy uncertainty globally,” and potential upside pressure on several commodity costs.

All three measures of February U.S. producer price inflation (3.2% overall, 3.4% core which excludes food & energy, and 3.3% excluding food, energy and trade) were a bit less than analysts were anticipating. Final demand service prices fell 0.2% on month, an 8-month low.

Among other price reports today,

• The combined Swiss PPI/import price index rose 0.3% on month but dipped 0.1% on year. The 12-month change showed the smallest decline in a 20-month streak of drops. From February 2024 to last month, import prices declined 0.8%, while domestic producer prices rose by 0.2%.
• Irish consumer price inflation settled back to 1.8% last month from a 5-month high of 1.9% in January. CPI inflation peaked in October 2022 at 9.2% in Ireland.
• Swedish CPI inflation last month was reconfirmed at the preliminary estimate of 1.3%, up from a low in December of 0.8% but down from the December 2022 peak of 12.3%.
• Romanian consumer price inflation of 5.0% in February exceeded expectations by a quarter of a percentage point. Such previously subsided from 16.8% in November 2022 to as low as 4.6% last September.

Industrial production in the euro area advanced 0.8% in January, the best showing in five months in spite of a 1.2% drop in the energy sector. Compared to a year earlier, output was unchanged which ended a streak of twenty straight on-year declines.

A survey last month by the Royal Institute of British Chartered Surveyors revealed lessening perceived scope for rising home prices.

Factory output in South Africa rose much less than expected in January (just 0.2%) after having fallen in four of the prior five months, and that resulted in a 3.3% 12-month rate of decline, the most negative such reading in seven months.

New U.S. jobless insurance claims fell 2k last week to 220k.

Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

Tags: Euroland industrial production, National Bank of Poland, National Bank of Serbia, Swiss PPI, U.S. producer prices

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on Thursday, March 13th, 2025 at 6:25 am and is filed under New Overnight Developments Abroad – Daily Update.
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