Tame US PPI numbers dent the USD

Stuart Cowell Analysis Leave a Comment

The 0.2% August U.S. PPI headline rise with a 0.1% core price increase undershot estimates thanks to a lean 0.1% service price increase, with a flat trade service figure and a 0.3% gain for transportation and warehousing services.

We saw the largely expected figure for goods prices, with a 3.3% energy price rise and a 1.3% food price drop that left a 0.5% rise for the goods component overall.

On the old SOP basis we saw a 0.5% headline PPI rise after a 0.2% July drop but a 0.2% June increase. We tentatively expect a hurricane-led 0.5% PPI rise in September with a 0.2% core price increase thanks to a pop in gasoline prices and an assumed rise in service prices.

The y/y PPI rise should climb to 2.6%, after rising to 2.4% in August from 1.9% in July, while the y/y core PPI rises to 2.1% from 2.0% in August and 1.8% in July.

Oil prices have largely moved sideways in 2017, though we’ve also seen a drop in the dollar and a stronger global economy that has boosted commodity prices, after the opposite 2016 pattern of dollar and oil price gains, but global growth weakness.

Upward 2017 price pressure has been limited by the absence of an inventory recovery despite a petro-rebound that is trimming excess capacity.

The Greenbacks two day recovery faltered further today with GBP very much in focus. Cable rose to a 14 month high at 1.3225 before shedding 70+ pips on the weak earning figures earlier, these USA PPI numbers helps it hold north of 1.3250.

The H4 chart has support at the latest fractal high and 20 period moving average around the 1.3237 area and remains in bullish mood.

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