Bank earnings and PPI.

Yesterday's initial move following higher than expected CPI and lower jobless claims was not sustained. The US 10year bond yield appears capped around 4%, stocks recovered initial losses and the dollar strength turned to weakness. Sending yesterdays trade to it's stop loss. Although I still think given the data, it was a valid trade idea. What it does tell us though is how eager the market is to still price in earlier than expected rate cuts. Essentially, yesterday's reversal was the market defiantly saying "inflation is still going to fall faster than you think".

Where does that leave us? On the agenda today we have PPI data (another inflation metric) and the start of earnings season with banks reporting before the US open. A low PPI number combined with good earnings would likely been seen as a positive, giving the market the green light to rally. Meaning a 'risk on' trade could be a very viable option. But if the news is deemed as negative (high PPI and poor earnings) the initial reaction will be 'risk off' and I would be reluctant to trade that given yesterday's reversal. I would also be reluctant to trade option three, which would be mixed news, such as good earnings but high inflation.

In conclusion, I'll be tempted to trade any positivity today via a 'risk on' trade, most likely short USD. but any other outcome and I'd be more comfortable waiting until Monday to see how things settle.

I hope that makes sense, feel free to email any questions: johnelfedforexblog@gmail.com

Best wishes.