US CPI and PPI in Focus, 10-Year Yields Jump 1%, USD/JPY Climbs Higher

Added: 2026-05-20

[00:00:00]Well, try this quick here with a market update.

[00:00:03]Okay, so overnight in the US we had some very important top tier economic data out and that was the US inflation CPI data for April.

[00:00:16]So previous month for the headline inflation number for the CPI number year on year that came out that spiked up to 3.3% market was expecting this April number to come out a touch higher around about 3.6 maybe up to 3.7% but it actually came out even higher came out at 3.8% so well above expectations and pushing towards 4% so it looks as if inflation is starting to filter back into the US on the back of what is happening with crude oil. Now the the core number year on year the core number actually excludes food and energy so that crude price isn't included previous month that was at 2.6% year on year market was expecting that to marginally go up to 2.7% but core number just like the headline number also went up and that went up to 2.8% so above expectations and pushing 3%. So look these numbers obviously aren't good numbers so here is inflation is starting to hot up again in the US so if you look at the the Fed funds rate at the moment is 3.5% so look the headline number is certainly above Fed funds but core number still touch below 3% is below Fed funds so market at the moment isn't yet getting worried about Fed rate hikes and still thinks that the feds pretty much going to be on hold for the rest of the year.

[00:02:02]But I'd suggest that if we continue to see in the months ahead that core number edging up towards fed funds and headline going well above 4%.

[00:02:14]I think it's inevitable at some stage the risk is at market. Is going to and the feds going to be forced to hike rates at some stage. Maybe possibly around that September meeting. So anyway, that's um That is a risk going forward for the market. Okay, so how did the bond market react to this?

[00:02:34]So we did see US two years and 10 year yields up about 1%.

[00:02:40]So two years now are pretty much at 4%.

[00:02:45]So it's the highest they've been for some time.

[00:02:48]You know, pre-war they were actually down you know, down towards three 3.4 both three and a half percent.

[00:02:56]So they've come a long way higher. The 10 years they are now back above 4.4% around about 4.3%.

[00:03:05]And they are pushing up towards a very critical level which is four and a half percent.

[00:03:10]That is a level that's a bit of a line in the sand and it's a level that we saw Trump backflip on reciprocal tariffs last year you know, to get those yields lower which he was successful in doing but here we are we're back up there. And breaking four and a half percent there is a possibility obviously that the market and is going to want to push up towards potentially 5%.

[00:03:36]None of that is good.

[00:03:39]Technically as well we've been trading in a a huge you know, triangle formation that's US 10 year yields for the last two years.

[00:03:47]And we are technically at the moment right up against that uh trend line resistance.

[00:03:53]Uh so uh even technically we go up towards, you know, 4 and 1/2, it looks like we'd be breaking that chart formation.

[00:03:59]Uh and that chart formation does want a lot higher for yields.

[00:04:04]Um so certainly uh trading these markets at the moment, I think you need to keep an eye on what's happening with these yields, uh especially if they start to break higher, uh because obviously it's going to impact pretty much every other market um and pretty much in a negative way.

[00:04:22]Uh cuz obviously we're going to see a stronger US dollar. Uh it's going to weigh on precious metals, especially gold, uh and it is a negative uh when yields go higher for equities as well.

[00:04:34]Um tonight we do have uh another economic data print out of the US, which is important for yields, uh and that is producer price index. Um and market uh last month that spiked up to 4%. Market is expecting that to go up a whopping uh 1% uh or round it up to 4.95% almost. Uh so it's a huge rise um in PPI. Uh this is inflation at the producer level. Uh generally when that happens, uh it gets fed to consumers at some stage with a bit of a lag. So um seeing uh a hot PPI straight after a hot CPI uh is something that could get these yields spiking higher.

[00:05:21]Um so again, something to watch out for tonight in uh and a big focus for the market. Uh looking across other markets, uh US equity markets absolutely phenomenal performance.

[00:05:33]Um US equity markets did get hit on the back of that high inflation number, uh but on the close, what did we see? We saw a pretty big reversal.

[00:05:43]Um the Dow actually finished up marginally positive, 0.1 of a percent.

[00:05:49]S&P marginally negative, just 0.1 of a percent.

[00:05:53]Um and the only one that really lost any ground was Nasdaq and it was down uh 0.8 of a percent. Uh but still all of those equity indexes well off their lows um and it's just the the absolute um this bull run um raging bull market that we're seeing at the moment in equities, uh it just shrugs off any bad whether it's the war, whether or not it is crude oil prices, whether or not it's yields, high inflation.

[00:06:22]Um you know, investors and traders are just continually buying dips and just will not sell. Um having said that, um again at some stage uh if the yields do do some work and start breaking higher, I can't see these equities hanging on. Um so um again for equity traders, certainly keep an eye on those yields.

[00:06:44]Uh as far as the um currency markets are concerned, yes, they did exactly what they're supposed to do when you see high yields. US dollar was bid.

[00:06:53]Uh so we saw dollar index DXY up a um just over half a percent what not. Um dollar yen was one of the biggest movers. Uh that went up by like a big figure yesterday, back up to 157 60-70 level, pushing back up towards 158.

[00:07:10]Um the lows from the Japanese intervention in the last week or so as uh was just sub 155.

[00:07:18]So dollar yen is now going back um almost 300 points from the intervention lows higher. Um so I'd imagine the Japanese are looking at this, shaking their heads um in that they cannot get the yen um strengthen even with intervention. It's almost like giving the market free money. Um so I'd imagine and they're going to have to raise rates next month uh to really uh get some traction on the air. But in any case, Dolly Ann, yes, higher.

[00:07:50]Precious metals Gold had a bearish outside range day yesterday. Doesn't like yields higher, doesn't like US dollar higher.

[00:08:00]And it's hard to see those precious metals, especially gold, getting any traction when we're seeing what's happening in yields. So, I'd certainly be looking to buy selling any sort of strength for lower levels to come. Crude oil is trading over over 100 bucks.

[00:08:20]Obviously, we're getting no positive headlines with what's happening in US in the Middle East. So, that is an issue.

[00:08:31]And if crude does start going towards $110, you'd imagine that's going to weigh it on equity markets. It really needs positive headlines to go lower. I don't see what that coming anytime soon.

[00:08:44]Anyway, finally, Trump meets in China soon. So, he's there for a couple of days. Lots of high-level meetings, obviously. We're going to get lots of headlines. So, there's a lot going on in markets. Good luck. We'll check back with you shortly.