Dollar slides as bond rally outweighs hot US PPI, euro posts best day

The dollar kept losing ground through the US session on Thursday as a rally in US government bonds outweighed a much hotter than expected producer price report. Investing.com reports that the bond rally offset the hot PPI and that the euro recorded its best day in two months.

Our earlier recap covered the PPI surprise and the retail sales beat. What changed since then is that yields kept falling into the close. The investingLive Americas wrap says yields continued to fall even after the data, which showed September producer prices at 6.3% against 5.3% expected.

What moved and why

The rest of the US calendar sent mixed signals. According to investingLive:

• The Empire State manufacturing index rose to 25.50 against 10.25 expected, its highest reading since December 2021.
• The Philly Fed index fell to 20.9 against 28.4 expected, from 37.8. New orders dropped to 4.3 from 29.2.
• Retail sales rose 0.8% in September against 0.3% expected, but the control group rose only 0.1% against 0.3% expected.
• Initial jobless claims came in at 199,000 against a 200,000 estimate.

The softer details in the Philly Fed survey and the retail control group sat alongside the strong headline numbers.

The Canadian dollar also firmed. Investing.com reports that the loonie gained as the US dollar retreated. At home, investingLive notes that Canadian August manufacturing sales rose 1.5% against 1.1% expected, while wholesale trade fell 1.6% against a 1.5% drop expected.

The majors at the ECB fixing

The table shows the ECB reference rates of 15 October against the 14 October fixing. These are one official fixing per day, not live quotes, so they may not reflect moves later in the session.

The Australian dollar was the outlier, with its fixing down 1.41% and back below 0.7000. The headlines in our pack do not explain the drop. Our sister site uses the move to explain how to measure volatility in AUD/USD. The Mexican peso also weakened, with USD/MXN up 0.86% on the day and 2.83% over five fixings. Separately, Investing.com reports that Argentina halted local dollar bond sales as yields surged.

Charts: EUR/USD and the dollar index.

Central banks and data in the news

New Zealand data landed after the US close. investingLive reports that the manufacturing PMI jumped to 56.5, a 15th straight month of expansion, and calls it mildly supportive for the kiwi. But card spending fell for a second month while food prices held flat in September. investingLive describes the result as a mixed picture, with weak household spending offsetting the stronger factory survey.

On the Fed, Investing.com reported on Wednesday that hot CPI had put an October rate hike back in play. Thursday's fall in yields suggests bond markets did not add to that pressure after PPI.

The Bank of England published David Roberts' CV and questionnaire for the Treasury Select Committee as part of his reappointment process.

What to watch next

• US yields: whether the bond rally that Investing.com credits for the dollar's slide holds after a run of hot inflation data.
• Fed October decision: the hike debate Investing.com flagged after CPI.
• New Zealand: investingLive says the return to growth in factory employment is the detail policymakers are likely to watch most, with fuel prices the main cost pressure cited by firms.
• Bank of England: the Treasury Select Committee process for David Roberts' reappointment.