Both are critical data points, given that the PPI numbers feed into the Fed’s preferred inflation gauge and that retail sales account for nearly half of household consumption.
Consumer spending is by far the biggest driver of the U.S. economy, which seems still to be in solid shape – thus reducing the need for the world’s largest central bank to rush into cutting rates.
Futures pricing now shows a less than 10% chance of an easing cycle beginning in May, according to the CME FedWatch tool, although that could change very quickly as Fed expectations tend to swing from one data point to the next.
The bond market seemed to reflect bets for a higher-for-longer U.S. rates scenario, with the two-year Treasury yield notching a two-week high on Thursday. The dollar, however, was still largely on the back foot.
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Graphics are produced by Reuters.
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