US Dollar and Stocks Volatile Ahead of the US PPI

Investors have their eyes fixed on the Producer Price Index which is going to be detrimental to the pricing of the US Dollar and Stocks. Both 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 reads 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 is also able to affect the price, but as it is released on the same day as the PPI, may have a limited affect.

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 now declined to the lowest since the 19th of December 2021. Some economists have advised that the price is getting back 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, there are still many factors that may 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 to this, the keystone pipeline in the US is also likely to be shut for at least 1 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 which may change the price condition.

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 1-Hour Chart on December 9th

EUR/USD

The Head of 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 1-Hour Chart on December 9th

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 has the ability to 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 onto the consumer at a later point. 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. Though above 0.3% would be negative from the Fed’s point of view.

This 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 are likely to largely determine the price of both the US Dollar and US equities throughout the remainder of the month.

Summary:

• Crude Oil continues to be pressured by lower global demand while exporting countries slash prices.
• Oil prices continue to obtain bearish signals but supply may cause an upset due to disruptions and delays.
• Global Equities increased in value over the past 24 hours based on lower inflation expectations.
• The PPI and CPI are expected to determine the price of both the US Dollar and US Equities.