The PPI data reveal the slowdown in price pressures
US PPI inflation data printed a favorable decline in both core and headline numbers. April’s year-on-year print revealed a 2.3% increase compared to expectations of 2.5% and below last month’s 2.7%. Also, the Core PPI printed 3.2% against expectations of 3.3% and is below the previous 3.4%.
Month-on-month, PPI rose 0.2% in April compared with last month’s fall of 0.5% and against expectations for a 0.3% rise, suggesting that while the general direction of travel remains constructive, prices show little motivation to move lower. .
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USD lowers on release of PPI data and employment data
The dollar moved slightly lower after the data release, but it’s hard to tease apart the potential cause of the move as initial jobless claims rose to numbers last seen in 2021 .A softer labor market implies that the Fed may contemplate changing its view and consider exiting the future. rate hikes, which are typically low for the dollar. Although, it appears as if the Fed is holding off on hikes at current levels depending on incoming data. This only reinforces the importance of future inflation impressions.
American dollar 5 minute chart of basket (DXY).
Source: TradingView, powered by Richard Snow
Core inflation remains a concern despite improvements in the headline measure
The PPI serves to complement the market’s main inflation indicator, the Consumer Price Index (CPI), which typically elicits a larger market response. Headline inflation added to last month’s massive 1% drop to 4.9%. This is in stark contrast to the figure of the holder below, showing a downward reluctance.
The longer price pressures persist, the longer the Fed is expected to keep interest rates high, weighing on the economic outlook in the wake of unresolved regional bank turmoil and the impasse over the US debt ceiling .
Core US CPI does not drop significantly
Source: Refinitiv, prepared by Richard Snow
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— Written by Richard Snow for DailyFX.com
Contact and follow Richard on Twitter: @RichardSnowFX
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