The FP Markets Research Team produces First Light News during the early hours of the European session, a daily Market Briefing that helps ensure traders and investors are up to date in the macro space for the day ahead.

Good morning.

Thursday’s calendar featured several key macroeconomic events.

The European Central Bank (ECB) claimed the limelight mid-way through European trading, raising all three key benchmark rates by 25bps and pulling the Deposit Facility Rate to an all-time high of 4.00%. The central bank’s inflation forecast was revised higher for this year and the next but lower in 2025. ECB projections forecast an increase in inflation this year from 5.4% to 5.6%, and from 3.0% to 3.2% in 2024 and finally from 2.2% to 2.1% in 2025. The ECB noted in its press release the underlying reason behind its upward revisions is due to higher energy prices. Regarding growth, ECB projections forecast that economic activity will contract to 0.7% this year, down from 0.9% and from 1.5% to 1.0% in 2024.

ECB President Christine Lagarde took to the stage shortly after the rate announcement and hinted that we are nearing the end of the policy-tightening schedule but never explicitly confirmed anything. In the ECB Governing Council Press Conference, Lagarde added, ‘The Governing Council’s future decisions will ensure that the key ECB interest rates will be set at sufficiently restrictive levels for as long as necessary. The Governing Council will continue to follow a data-dependent approach to determining the appropriate level and duration of restriction’.

In other news, headline US PPI (Producer Price Index) inflation, or ’wholesale prices that reflect supply conditions’, rose 1.6% in August on a year-on-year basis, up from 0.8% in July and marking its largest increase in a year. The month-on-month measure increased 0.7%, up from 0.4% in July. According to the Bureau of Labour Statistics (BLS), similar to the CPI release on Wednesday, the headline increase was largely driven by a jump in energy goods, which rose 10.5% on a month-on-month basis, up from 0.8% the month prior; this was boosted by a surge in gasoline prices, up 20% on the month! Core PPI inflation, which excludes energy and food components, came in line with estimates showing an increase of 0.2% and 2.2% on a month-on-month and year-on-year basis, respectively.

US retail sales increased by more than expected at 0.6% in August, comfortably north of economists’ estimates of 0.1%; Ex autos were up 0.6% against 0.4% market consensus.

The US PPI and retail sales data exhibited big upside surprises, largely attributed to the rise in oil prices.

Longer-term price action on WTI oil is approaching a key resistance level on the weekly timeframe at $91.71. As this market finds acceptance north of $90, the Relative Strength Index (RSI) is also nearing overbought space. Therefore, this is a technical level likely worthy of the watchlist.

(Trading View)

Thursday ended with the buck finishing Thursday +0.6% higher, according to the US Dollar Index, pushing EUR/USD through key daily support at $1.0689. The Research Team released a post on the EUR/USD’s latest movement yesterday, which can be viewed here.

US stocks also closed the day sharply higher. The Dow Jones Industrial Average rose 331 points (+1.0%) to 34,907, the S&P 500 climbed 37 points (+0.8%) to 4,505, and the Nasdaq 100 was up 125 points (+0.8%) to 15,473.

Today…

Overnight, industrial production and retail sales numbers out of China posted a beat across the board for August, up 4.5% and 4.6% on a year-on-year calculation, respectively. The AUD/USD caught a bid on the back of this news, rallying +0.2% in the space of five minutes; the currency pair is currently higher by +0.4% on the day.

Along with a speech from ECB President Christine Lagarde today at 9:45 am GMT, upcoming data on the radar are the NY Empire State Manufacturing Index for September, and the UoM preliminary consumer sentiment survey and the UoM inflation expectations.

G10 FX space as of 08:00 am GMT+1:

(Trading View)

Events for the Day Ahead:

European Central Bank (ECB) President Christine Lagarde is Due to Speak at 9:45 am GMT.

New York Empire State Manufacturing Index for September at 12:30 pm GMT (Expected: -10.0%; Previous: -19.0%).

US Preliminary University of Michigan Consumer Sentiment Survey for September at 2:00 pm GMT (Expected: 69.2; Previous: 69.5).

Thanks for reading. Have a great day!

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