On Wednesday, US inflation stayed at the 40-year high, defying expectations of a bigger drop. Disappointing results eventually triggered market jitters.
The annual inflation rate in the US slowed to 8.3% in April from 8.5% in March but less than market forecasts of 8.1%. Consumer prices increased 0.3% month-over-month in April easing from 1.2% in March but above market forecasts of 0.2%.
In this light, the US Federal Reserve might hike rates by 50 basis points in June. St. Louis Fed President Jim Bullard's interview added fuel to the fire as well. The regulator plans to raise rates at future meetings, which is a "good benchmark for now," Mr. Bullard said. When asked if a 75-basis-point hike could be possible down the road, he replied it was "not my base case." However, a plan to raise interest rates by 50 basis points amid hopes that the pace of rate hikes could be slowed led to a stock market crash and a stronger US dollar.
Today, the market will focus on PPI data in the US. Figures are estimated to fall to 0.5% month-on-month in April from 1.4% in March. On a yearly basis, producer prices are forecast to drop to 10.7% versus 11.2%.
Notably, the market has shown no reaction to PPI data over the past 10 years. The focus used to be solely on consumer inflation. Today, however, this might change. Should results come in as disappointing as yesterday's statistics on consumer inflation, it could lead to a new sell-off of risk assets and the strengthening of the dollar.
Above all else, weekly jobless claims will be released in the US today. Figures are projected to drop to 195,000 from 200,000. The market is highly likely to show some reaction to the results.
In general, in light of recent developments, the market might see high volatility and a decrease in demand for stocks and commodities. Against this backdrop, the greenback is likely to get stronger on expectations of a 50-basis-points hike to 1.50% by the Fed in May.
