This PPI report is destined to be over-rated | Forexlive

The April US producer price index report is due at 8:30 am ET and I expect an unusually-large market reaction. Because of calendar quirks, the economic calendar since non-farm payrolls eight days ago has been absolutely barred. That’s left the market floating along but invariably starved for meaningful data on the economy. It’s also a market that’s obsessed with inflation.

Enter PPI. It’s not a great indicator and tells you mostly about commodity and materials prices but it’s also released by the BLS and the BLS also releases CPI. They use many of the same seasonal factors to adjust the numbers. So while I don’t think PPI offers much about inflation (we already know commodity and materials prices) and won’t tell us anything about core services inflation, PPI can give you a hint on seasonal skews for CPI.

What does that mean for trading it today?

There’s no need to over-complicated it. If it’s hot, the dollar will rally and risk trades will recoil. If it’s cool, the opposite. Even big moves will be hard to fade until after CPI because the market has gotten so complacent and CPI is so critical.

As for the numbers, headline PPI is forecast up 2.2% y/y while ex-food/energy is forecast to rise 2.4%.

Good luck.