Dollar retreats from 18-month high despite hot US PPI and retail sales

The dollar has pulled back from its 18-month peak, even though a fresh batch of US data ran hot. Investing.com reports that the dollar retreated from those highs despite hotter US producer prices, a day after the CPI surprise revived Fed hike fears.

Our last recap covered the dollar holding near its high after Fed's Goolsbee and the Beige Book. Since then, the focus has moved to a dense block of US releases and to sterling, which found support from UK growth figures.

US data: hot prices, mixed activity

The headline number was producer inflation. According to investingLive, US September PPI rose 6.3% year on year against 5.3% expected, up from 5.4% previously.

Consumer spending also beat on the headline. investingLive reports that September retail sales rose 0.8% on the month against 0.3% expected. Sales excluding autos rose 0.9% against 0.5% expected. The details were softer, though. Sales excluding gasoline and autos rose only 0.2%, and the control group rose 0.1% against 0.3% expected.

Regional factory surveys pulled in opposite directions:

• The Empire State manufacturing index jumped to 25.5 against 10.25 expected, its highest reading since December 2021, according to investingLive.
• The Philadelphia Fed index fell to 20.9 against 28.4 expected, down from 37.8. investingLive notes new orders dropped to 4.3 from 29.2, while prices received rose to 40.1 from 31.3.
• Initial jobless claims came in at 199,000 against a 200,000 estimate, per investingLive. Continuing claims fell to 1,710,000.
• August business inventories rose 0.4%, in line with forecasts.

Earlier in the day, investingLive warned that PPI and retail sales posed fresh risks after the CPI shock, with equities staying under pressure. Its European session wrap described markets as consolidating, with oil supported by Middle East tensions and crypto under pressure. Our sister site covers that risk-off spillover in Bitcoin's dip below $80,000 on hike fears and a Korea stock rout.

Sterling, the euro and the yen

Sterling was the main European story. Investing.com reports that the pound rose as UK growth beat forecasts and the dollar retreated.

In the euro area, Investing.com says euro bonds reclaimed safe-haven status as equities faltered on worries about AI-related debt.

In Canada, investingLive reports August manufacturing sales rose 1.5% against 1.1% expected, while wholesale trade fell 1.6% against a 1.5% drop expected.

The reference rates

The ECB reference rates of 15 October give a snapshot. These are official daily fixings, not live quotes. EUR/USD was fixed at 1.1208, up 0.12% from 14 October. USD/JPY was fixed at 157.98, down 0.30%, and USD/CHF at 0.8302, down 0.38%. GBP/USD was fixed at 1.3247, down 0.15%, so the fixing does not yet reflect the gain Investing.com describes.

The largest move among the majors was in the Australian dollar. AUD/USD was fixed at 0.6911, down 1.41% from 0.7010. The headlines in our pack do not explain that drop. USD/MXN was fixed at 18.523, up 0.86% and 2.83% above the 8 October fixing. Charts: DXY and AUD/USD.

Central banks

The Fed remains the main driver. Investing.com reported on Wednesday evening that hot CPI put an October Fed hike back in play. The PPI surprise adds to that inflation picture, even as the dollar eased.

The Bank of England published David Roberts' CV and questionnaire for the Treasury Select Committee, linked to his reappointment.

What to watch next

1. Fed hike pricing. Whether the hot CPI and PPI readings keep an October move in play, as Investing.com reported.
2. Sterling after UK growth. Whether the pound holds the gains Investing.com linked to the stronger growth data.
3. Risk sentiment. investingLive flagged pressure on equities and crypto, and Investing.com flagged AI debt worries.