PPI Up Next
The US Dollar is firmly back in the spotlight this week with a slew of top-level US data due. The headline event will be the latest CPI reading due on Wednesday., However, ahead of that data we’ll get the latest PPI data tomorrow which will no doubt inform trader’s views ahead of the CPI reading.
PPI vs CPI
Both readings are seen as key to calculating overall inflation in the economy. The difference between the two is that CPI (Consumer Price Index) measures change in prices for consumers while PPI (Producer Price Index) measures change in prices for producers.
Market Impact
Typically, higher costs for producers are passed on to consumers leading to higher CPI. Similarly, falling PPI prices can be good news for consumers, lowering CPI. While the actual transmission of costs varies from period to period, generally a lower PPI reading is seen as disinflationary and a higher PPI reading is seen as inflationary, in the same way that CPI readings are interpreted.
Forecasts for Tomorrow
There are two sets of PPI figures due tomorrow, core and headline. Core measures producer costs excluding more volatile items like energy and food. On the headline figure, the market is looking for PPI at 0.2%, unchanged from the prior month. Core PPI is forecast at 0.2% also, down from 0.4% prior. Data in the region or below should be mildly USD negative.
However, given the proximity to the more important CPI reading on Wednesday, price reaction will likely be limited unless we see a meaningful surprise on either side of the forecast. An upside surprise will raise inflationary risks, pushing USD higher while a downside surprise should see USD moving lower.
Technical Views
DXY
The sell-off in the DXY has stalled for now into a test of the 102.46 support and the bull channel lows. However, price remains vulnerable to further downside on the back of recent selling. While the market holds below 104.05, risks of a deeper drop to 100.03 are seen.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.