Insights 
VT 
In the European session, the release of the UK GDP data did not meet expectations, resulting in a lower GBP. The focus for the day includes speeches from various ECB members.
In the American session, attention will be on the US PPI and Jobless Claims data, with Core PPI Y/Y expected at 3.1%, and M/M at 0.3%. Previously, the US CPI was lower than expected, exerting pressure on the dollar and a soft PPI could maintain this trend.
US Labor Market Overview
US Jobless Claims continue to be a key weekly release, indicating labour market conditions. Initial Claims have remained within the 200K-260K range since 2022, while Continuing Claims are progressively increasing.
Seasonal factors typically cause claims to rise in the summer, but a spike above 260K could indicate concerns over labour market conditions. Initial Claims are projected at 240K, compared to 247K previously, while Continuing Claims are expected at 1910K, up from 1904K.
There is a 30-year Treasury auction in the afternoon, with potential interest if PPI data is weak. Various central bank speakers, including multiple ECB members, will provide insights throughout the day.
With the disappointing UK GDP release dragging the pound downward, the market is left to digest a clear signal that domestic activity is falling short of prior forecasts. While this may appear to be a short-term setback, it underscores a deeper issue—one of restrained domestic consumption and lacklustre service sector output. From our standpoint, such a reading not only weakens the currency in the immediate term but also casts shadows on near-term rate expectations from the central bank. The room for further hikes begins to close, especially if inflation data continues to guide lower.
Focus on US Economic Data
Looking stateside, traders are shifting their attention to US economic data ahead of the Wall Street open. With the Producer Price Index in focus, there’s a particular sensitivity here—especially after this week’s Consumer Price Index figures came in below expectations. Motion in pricing data from producers tends to follow a pattern, and if it confirms the soft CPI pulse, it feeds into a broader disinflationary theme investors have been weighing.
The year-on-year Core PPI reading of 3.1% sets a firm line in the sand. Anything below that would likely trigger another round of selling in dollar pairs, mirror-stepped by lowered Treasury yields. The market is clearly on edge about inflation exhaling too quickly, particularly in light of yesterday’s reaction. We’ve seen how risk appetite tends to rise when price pressures ease, so if today’s figures are also friendly, this bounce might gain traction into the weekend. That being said, it’s the month-on-month PPI reading that often sets the short-term tone—it’s nimble and reacts fast in markets sensitive to directional shifts.
Jobless claims, a pillar in the weekly economic calendar, are once again at a juncture where they carry more than just procedural interest. Given ongoing questions around the durability of the US labour market, we’re watching this one closely. If claims edge above 260K, there will be few ways to interpret it optimistically. Risk instruments could accelerate upwards, as lower wage pressure becomes more plausible, while rate expectations taper downwards. A sharper-than-expected rise in Continuing Claims, however small it may seem on paper, hints at longer job search durations—suggesting hiring might be losing steam.
What stands out is the consistency: Initial Claims hovering near the top of the usual 200K–260K band is no longer seen as comfort, especially with ongoing gains in continuing claims. This was once a stable range, but now it’s pressing against the upper bound in a way that invites nervous re-evaluation. We’re reading that as early stress.
Today’s 30-year Treasury auction is worth paying attention to, especially in the context of softer PPI. A weak inflation print might pull yields further down, and that can impact demand in the auction. Bidders might anticipate lower future rates, thus demanding less of a premium now. If the auction clears easily, it supports the idea that the bond market is positioning for more dovish signals from policymakers down the line.
Multiple ECB officials are set to deliver prepared remarks throughout the day. Each of these has the potential to offer market-moving clues, particularly if they address the timing or scope of future policy steps. We suggest parsing tone and language carefully. Differences in emphasis—on data-dependence, for instance—matter more in months like these, when inflation data shows a less vigorous upward push and growth concerns quietly gain space.
In short, we interpret today as a data-sensitive session, where reactions will likely be more linear: softer data supports dovish expectations, strong prints swing the pendulum back. Rate traders should focus less on broad sentiment and more on the tick-by-tick details, particularly around price data and yield reaction. Timing matters here, not just direction.
