Summary:

• US April PPI Y/Y: +2.6% vs 2.8% exp
• Core reading Y/Y drops to 2.3% 
• USD pulling back after strong recent gains

Inflationary pressures in the US have cooled according to the latest data with the PPI for April falling more than forecast. In Y/Y terms the gauge fell to 2.6% from 3.0% previously – well below the 2.8% expected. Stripping out the food and energy components to arrive at a “core” reading the release was even lower at 2.3% Y/Y from 2.4% prior. 

 Both the PPI and core PPI readings fell back in the month of April but they remain above 2%. Source: XTB Macrobond

Earlier this year inflation was very much front and centre of traders minds after the January NFP release showed a marked rise in average earnings, but this economic indicator has receded in terms of importance in the intervening months. However, given the latest push higher in crude oil, with the market hitting another 3 1/2 year high today, attention may once more turn more acutely to price pressures going forward. 

PPI releases are typically less influential on the market upon their release than the CPI equivalent (due out tomorrow at 1:30PM) and there hasn’t been a major reaction in the immediate aftermath. The USDIDX has continued to drift lower and made a new low for the day, but if truth be told the buck was already drifting before the data hit. 

 The USDIDX has made a strong push higher in recent weeks but it has fallen back so far today. Source: xStation

There’s been a quite incredible run higher in the greenback over the last 4 weeks, with the trade-weighted index rising from below the 89 handle to a peak of 93.25 today. However there has been a bit of a reaction at this level and an inverted hammer may be forming with the market falling back into the red on the day.