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Wall Street Rises on Buyer Dominance Despite Higher PPI; Powell Maintains Firm Stance on Interest Rates

INVESTINGWall Street Rises on Buyer Dominance Despite Higher PPI; Powell Maintains Firm Stance on Interest Rates

Yesterday on Wall Street, the “buyers” camp once again prevailed. The indices closed higher despite the Producer Price Index (PPI) exceeding market estimates. The reaction was largely determined by a downward revision of March’s figures. Jerome Powell reiterated that interest rates will remain elevated for an extended period, and patience will be necessary before any easing of monetary conditions can occur. Initially, yields on U.S. Treasury bonds rose following the PPI report but then reversed and ended the day lower, boosting U.S. stocks. The dollar lost value. The market is now waiting for today’s Consumer Price Index (CPI) readings from the USA.

In his speech yesterday, Powell did not surprise anyone and reiterated the well-known statement about the need for more evidence that inflation is moving toward the target. He repeated that recent CPI reports suggest that confidence in reducing rates may take longer than previously thought. He added that monetary policy is currently restrictive in many respects but also acknowledged that only time will tell if the current level of rates is high enough to combat inflation. To some extent, Powell did not close the door on an unlikely rate hike at this time. Another very diplomatic appearance, which did not cause greater market volatility.

U.S. producer prices in April aligned with market consensus on a year-over-year basis. However, month-over-month changes surprised with higher readings, while previous values were significantly revised downward. Initially, the dollar strengthened, then moved to a defensive position. The EUR/USD rate dropped to just below 1.0770 and then sharply rose to 1.0820. It is currently rising again and is around 1.0830. It appears that the market, after “digesting” the data, paid more attention to the revised March figures.

Economic growth in Poland in the first quarter was higher than economists’ forecasts, at 1.9% year-over-year. Quarter-on-quarter growth was at 0.4%. Meanwhile, the final CPI year-on-year was 2.4%, and month-on-month it was 1.1%. The Polish złoty is strengthening. The EUR/PLN rate fell below 4.27, and the USD/PLN to 3.9340. The strength of the złoty may also be derived from the rising rate of the main currency pair.

Łukasz Zembik, Oanda TMS Brokers

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