The Euro-Area PPI Drops To The Lowest Level Since March 1987

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 0.7% in March, following a 0.4% (revised) drop just one month prior. From one year earlier, the PPI came in at -3.1%, the lowest read since February 1987.

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

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 upcoming period.

Forex Technical Reaction: The euro was unmoved by the release. The pair is trading 40 pips below the Tuesday opening price, after retracing half of the declines seen during the early part of the overnight session.

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