Ripping hot US PPI – a plot twist or red herring?

Breaking: Ripping hot PPI upside surprise…driven by services?!?
Just head of publishing this the US released July PPI numbers, which came in ripping hot on both the headline and at the core.  But PPI is only for US-produced goods – yes, these could have imported commodity components, but nearly all of the spike in the number was on a huge spike in some services categories, especially “portfolio management”…?!? I can’t see this reaction to the PPI holding in a meaningful way – if it does hold, it is because of other factors…and now back to the program.

Tentative EURUSD price action around 1.1700
The euro’s surge above 1.1700 proved fleeting, as the dollar found some footing into today’s US data and ahead of tomorrow’s US Retail Sales and preliminary Michigan sentiment survey. The sudden JPY volatility (more below) and EURJPY flows and even EURGBP flows (even more below) may be in play here. The Eurozone calendar is light until next Thursday’s flash PMIs for France, Germany and the broader bloc. The euro has been a bit more adrift and passive of late on concerns linked to weak demand on US tariffs and slow-to-arrive-on-the-scene German fiscal stimulus. Technically, if we see a deeper rejection, the chart vulnerable to a retest of 1.1600 support or even lower if we can’t re-stick the move back above 1.1700 locally.

Yen strength – will it run?
The JPY rally that erupted after Treasury Secretary Bessent’s remarks on the BoJ’s likely need to raise rates has yielded to sideways action right around the key recent range lows above 146.50, with resistance near 147.50 if we are to consider ourselves on bear continuation watch. The September BoJ meeting looms large, if distant, for whether we get firmer guidance on an October move (about 10 basis points of easing priced for that meeting.) In the meantime, global yield direction and equity risk tone will dictate whether this yen move extends. The dip in US yields and the reversal of the spike in German yields from Tuesday yesterday have thrown the shoulder behind the JPY cross bearish case. (note EURJPY steep sell-off today). For USDJPY, a dip through 145 next week would set the market up for a full test of the 142–140 zone, especially if global bonds remain bid and risk appetite wobbles.

Sterling: as good as it gets?
The UK’s Q2 GDP beat (+0.3% q/q vs +0.1% expected) and solid job-market related data this week have given sterling about as much as it can get, but we continue to fret the structural headwinds. Last week’s BoE cut came on a razor-thin 5–4 split, fueling the initial pop higher in GBP, but this feels like a high-water mark unless incoming data continues to feed the narrative. The UK CPI print next Wednesday will be crucial — a softer-than-expected outcome could quickly unwind this sterling optimism. EURGBP 0.8600 is important for next steps.

Chart: USDJPY
USDJPY has reversed sharply from its push above 150.00, with the pair now eyeing 145.00 as the next big psychological test. The combination of falling US yields and shift in Japanese yields higher on noise around potential BoJ action yen sentiment is a toxic mix for USDJPY bulls. A triple whammy would be weaker global risk sentiment, but that is nowhere in evidence today. Resistance is now layered 147.50 and then the local 148.50+ high if we are to remain in bear mode here. So far we have a bearish reversal, not a new bear trend. A swift move below 145.00 opens the path toward the larger 142–140 structural zone.