The Euro-Area PPI Drops To The Lowest Level On Record

Release Explanation: The PPI measures the rate of inflation of manufacturers when purchasing Goods and Services; the rate of Inflation at the factory Gate. “An increase in the price of raw Goods and services usually gets passed on to the consumer, therefore this is the first stage on Retail Inflation” TheLFB-Forex.com Trade Team members said

TheLFB-Forex.com Trade Team Thoughts: The Euro-area PPI shows that the pace of inflation is dropping at a sustained pace. Producer prices fell 1.0% in April, following a 0.7% drop just one month prior. From one year earlier, the PPI came in at -4.6%, the lowest read on record

The PPI read, excluding the energy sector, fell by 0.4% in April, at a similar pace as in the last few months. March was the ninth consecutive month in which the index contracted, being the longest streak on record.

TheLFB-Forex.com Trade Team notes that the release puts additional pressure on the ECB to raise the inflation expectations over the medium term. The drop seen in the last period was huge, since last year, the PPI index toped at 9.2%. According to TheLFB-Forex.com forecasts, these deflationary pressures will likely be passed on to the CPI, which is also expected to drop below the zero benchmark in the following month.

Forex Technical Reaction: The euro plunged 100 pips during the European session, as the S&P futures failed to break the 945.00 swing points. Against the pound, the euro lost 40 pips to reach the lowest value since December 2008.

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