Further US Data Weakness

US equities are continuing to push higher on Friday as the US Dollar drifts further lower following lacklustre data yesterday. Headline US retail sales were seen printing just 0.1%, down from 1.7% prior, with core retail sales also seen at 01%, down from 0.8% prior. Alongside these readings, headline PPI was seen falling 0.5% last month, down from 0% the month before and below the 0.2% reading the market was looking for. Core PPI was also down on the month at -0.4% from 0.4% prior, below the 0.3% the market was looking for.

Fed Easing Expectations

Coming on the back of the weaker US inflation data we saw earlier in the week, the data adds to a sense of softening US economic activity, putting focus back on Fed easing expectations. Indeed, pricing for a cut as early as July has started to move higher again following the data, now sitting around 35%. Speaking at the start of a two-day conference yesterday, Fed chair Powell warned "We may be entering a period of more frequent, and potentially more persistent, supply shocks—a difficult challenge for the economy and for central banks." 

Near-Term View

Looking ahead, equities look likely to remain supported while USD continues to drift lower. Residual optimism around a potential US/China trade deal and growing Fed rate-cut expectations should continue to support stocks though any sign of a breakdown in US/China trade relations could see sentiment deteriorate quickly.

Technical Views

S&P 500

The rally in the S&P has seen the market breaking out above the 5,721.25-level with price now testing above the 5,832.75-level today. With momentum studies bullish, focus is on a continued push higher towards the 6,154.75-level next and a retest of the underside of the broken bull trend line.