Dollar rally deflates on weak PPI – back to reality

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The US dollar nearly completed a week of recovery until weakness struck again. The producer price figures serve as a reality check. The greenback comeback is now in doubt and the final verdict belongs to the more important inflation indicator: the Consumer Price Index released tomorrow.

Jobs are looking great as seen in the Non-Farm Payrolls and also in the JOLTs report. Inflation? Not so much.

Headline PPI slipped by 0.1% m/m against expectations for a rise of the same scale. Core PPI also dropped, by 0.1% against predictions for a rise of 0.2%. Year over year data followed with 1.9% on the headline and 1.8% on the core, both below projections.

If PPI represents inflation in the pipeline, things aren’t looking so great. And without inflation now or later, it is hard to see much enthusiasm for a rate hike.

In a separate report, we learned that US jobless claims stand at 244K, within known ranges. Once again, jobs look good but inflation is nowhere to be seen.

Currency reaction to the PPI report

More: EUR/USD consolidating above support: boom or bust?

Later today we will hear from Bill Dudley. He is No. 3 at the Fed.

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About Author

Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

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