U.S Producer Prices Surge, Delays Rate Cut Hopes

Inflation Concerns Grow as U.S. PPI Beats Expectations

U.S. producer prices rose solidly in January, providing further evidence that inflation is gaining momentum and reinforcing market expectations that the Federal Reserve will delay interest rate cuts until the second half of the year. The producer price index (PPI) for final demand increased by 0.4% last month, following an upwardly revised 0.5% gain in December, exceeding the forecasted 0.3% rise.

(U.S. PPI m/m Chart, Forex Factory)

The increase in PPI was broad-based across both goods and services. Wholesale goods prices surged 0.6% after a 0.5% gain in December, with more than half of the rise driven by a 1.7% jump in energy prices. Food prices also climbed sharply by 1.1%, with egg prices soaring 44.0% due to an avian flu outbreak. Excluding food and energy, core goods prices edged up 0.1% for the second consecutive month.

The Labor Department’s report on Thursday followed news that consumer prices accelerated in January at the fastest pace in nearly 18 months. However, some details of the PPI report suggested a more moderate rise in key inflation indicators tracked by the Federal Reserve for its 2% target, compared to initial expectations after the strong CPI data.

Technical Analysis for U.S Dollar Index Chart

(U.S Dollar Index Daily Chart, Source: Trading View)

From a technical analysis perspective, the overall trend for the U.S. Dollar Index remains bullish, as indicated by the higher highs and higher lows. It is currently testing the support zone and the previous low level. If this support zone fails to hold, it is highly possible that bearish momentum might take control, pushing the price downward.

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