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Market junkies were in no mood to buy up higher-yielding assets, placing more bets on safe-havens as North Korea tensions remain heightened. But since Pyongyang’s beef is mostly with the U.S. and some FOMC members don’t want to be rushed into hiking rates, the Greenback was unable to enjoy the risk-off party led by the franc and yen.

  • U.S. headline PPI down by 0.1% vs. projected 0.1% uptick
  • U.S. core PPI down by 0.1% vs. estimated 0.2% gain
  • U.S. initial jobless claims up from 241K to 244K vs. 240K consensus
  • FOMC member Dudley: Inflation will reach some time before reaching 2%
  • Dudley: Sluggish productivity could dampen wage growth
  • Business NZ manufacturing index fell from 56.0 to 55.4

Major Events/Reports

Cautious remarks from Dudley

New York Fed President Dudley gave another round of not-so-hawkish remarks during his testimony, casting some doubt on the likelihood of seeing another interest rate hike next month.

As a voting member of the FOMC, Dudley’s comments carry a lot of weight in terms of dictating dollar direction. He admitted that it will take some time before annual inflation hits the central bank’s 2% target as the strong dollar is dampening domestic price pressures. He added that sluggish productivity will also keep a lid on wage growth, which is another factor influencing overall inflation.

These pessimistic remarks were underscored by the weaker than expected PPI figures, which spurred speculations of downbeat CPI readings due on Friday’s New York session. Headline PPI fell 0.1% instead of posting the projected 0.1% uptick while the core PPI also posted a 0.1% dip versus the estimated 0.2% gain.

Stocks tumble on NoKor worries

U.S. equities were unable to hold on to their post-earnings gains over the past few days as indices chalked up their second worst day for the year.

  • The Dow 30 index closed 204.69 points down to 21,844.01 (-0.93%)
  • The S&P 500 index was down 35.81 points to 2,438.21 (-1.45%)
  • The Nasdaq closed 135.46 points down to 6,216.87

After the recent slew of threats from North Korea, U.S. President Trump remarked that maybe his “fire and fury” warning wasn’t strong enough to have Kim Jong Un shaking in his boots.

Although some U.S. officials suggested that a diplomatic approach should be pursued, the Donald reminded that “We are backed 100% by the military, we’re backed by everybody, and we’re backed by many other leaders” and this didn’t seem to cool any tensions. I was waiting to hear if they were backed by dragons, too!

Major Market Mover(s):

JPY

The Japanese yen was the only one left standing as the lower-yielding currency drew demand from risk-off flows and dollar weakness.

USD/JPY slid from 109.88 to 109.09, EUR/JPY is down to the 128.50 minor psychological mark, GBP/JPY fell from 142.74 to 141.58, and NZD/JPY tumbled to 79.35.

Watch Out For:

  • 12:30 am GMT: RBA head Lowe’s testimony
  • Japanese banks closed for the holiday