In the European session, the UK GDP data fell short of expectations, causing the GBP to drop. Today’s attention also turns to speeches from various ECB members. During the American session, the focus will shift to the US PPI and Jobless Claims data. The Core PPI Year-over-Year is expected to be 3.1%, with a Month-over-Month expectation of 0.3%. Recently, the US CPI was lower than anticipated, putting pressure on the dollar. If the PPI is soft, this trend may continue. US Jobless Claims are a key indicator of labor market conditions. Initial Claims have stayed between 200K and 260K since 2022, while Continuing Claims are gradually increasing. Usually, claims tend to rise in the summer. However, if they spike above 260K, it may signal concerns about labor market health. Initial Claims are projected at 240K, down from 247K last time, while Continuing Claims are expected to rise to 1,910K from 1,904K. In the afternoon, there will be a 30-year Treasury auction, particularly relevant if the PPI data is weak. Multiple ECB members will also be speaking, providing insights throughout the day. The disappointing UK GDP data has lowered the pound, indicating that domestic activity isn’t meeting earlier forecasts. This may seem like a short-term issue, but it highlights a more serious concern: weak domestic consumption and a sluggish service sector. This trend weakens the currency in the short term and raises doubts about future rate hikes by the central bank, especially if inflation data continues to trend downward. In the U.S., traders are gearing up for economic data before the Wall Street open. With the Producer Price Index in focus, there’s heightened sensitivity, especially after the week’s Consumer Price Index was disappointing. Producer pricing data usually follows a trend, and if it aligns with the soft CPI figures, it would reinforce a broader disinflation narrative. The year-on-year Core PPI at 3.1% sets a significant benchmark. If the result is lower, it could lead to more selling of dollar pairs, reflected by lower Treasury yields. The market is anxious about fast inflation decline, especially after recent reactions. Generally, risk appetite increases when price pressures ease. If today’s figures are favorable, this positive movement might carry into the weekend. However, the month-on-month PPI reading often sets the short-term market tone, making it crucial for traders. Jobless claims, a staple of the weekly economic calendar, are at a crucial point. With ongoing uncertainty regarding the strength of the US labor market, we’ll keep a close watch. If claims surpass 260K, optimism will be hard to find. Such an increase could lead to a rise in risk instruments, as lower wage pressures become more likely, and rate expectations decline. Even a slight uptick in Continuing Claims suggests longer job searches, indicating that hiring may be slowing. What’s particularly concerning is that Initial Claims are hovering near the upper end of the 200K–260K range. This once stable level has now reached a point that requires careful reconsideration, signaling early stress in the labor market. Today’s 30-year Treasury auction is especially noteworthy in light of weaker PPI. A poor inflation report could lower yields, affecting auction demand. Bidders might expect lower future rates, leading them to require less premium now. A smooth auction could suggest that the bond market anticipates more dovish policy from central banks. Multiple ECB officials will deliver prepared remarks throughout the day. Their comments could significantly impact the market, particularly regarding future policy timelines or scope. It’s essential to pay close attention to their tone and language. Shifts in emphasis on data dependence are critical during periods of lower inflation and rising growth concerns. In summary, today is data-sensitive, with likely linear reactions: softer data supports dovish expectations, while strong numbers swing momentum back. Rate traders should focus on detailed movements rather than broad sentiment, particularly around price data and yield responses. Timing is key, not just direction.

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