EURUSD, H1
The July US PPI report beat estimates with gains of 0.6% for the headline and 0.5% for the core, as prices continue to ratchet higher after the big coronavirus hits in March and April.
The July gains rounded up from 0.597% and 0.509% respectively. The July PPI pop is the biggest gain since October of 2018. The July updraft mostly reflected a 5.3% July rise for energy prices that allowed a big 0.8% rise for goods prices, despite a -0.5% drop for food prices. We also saw a big 0.5% July rise for service prices, with a 0.8% July rise for trade services, which reflects margins of wholesalers and retailers, alongside a -0.8% July drop for transportation and warehousing services. We saw a 0.7% July rise for PPI on the old SOP basis, after a flat June figure, a 2.3% May surge that marked the largest gain since August of 1973, and a -3.5% record plunge in April. The net downtrend for PPI gains remains in place despite the July pop, given 6-month average price swings of -0.167% for the headline and -0.028% for the core that undershot respective 12-month average swings of -0.034% and 0.036%.
The CPI and PPI reports have shown some evidence of supply constraints since May, with an uptrend in oil prices and spikes for some prices, after initially showing huge March and April declines alongside the coronavirus hit to aggregate demand. The demand hit remains large, but we should see increasing evidence of supply chain disruptions as we approach Q4.
US CPI is reported tomorrow (August 12), with expectations shown below.
The Dollar was firmed by the warmer PPI outcome, leaving EURUSD rejecting 1.1800 again today and down to 1.1760 and USDJPY holding over 106.00 to trade to 106.25. Equity markets have opened mixed with USA30 higher by 1.12% and over 300 points, the USA500 positive by 15 points at 3375 and the USA100 losing some 67 points in opening trades.
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Stuart Cowell
Head Market Analyst
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