-The Bundesbank
EUR/USD was trading around weekly highs on Friday, as dovish FOMC meeting provided a long-term bearish bias for the greenback. At the same time, Europe is still sending worrying signs, with Germany, its powerhouse, recording its tenth straight monthly drop in producer prices.
On Friday the Federal Statistical Office said factory gate prices in Germany fell at annualized 0.8% in May, following a 0.9% drop a month earlier and falling short of analysts' expectations, which were expecting the headline PPI to fall only 0.7%. On a monthly basis, the indicator posted a 0.2% loss, down from the 0.1% downtick in April. The indicator reflects the average change in costs of goods and services sold by domestic producers and manufacturers in the wholesale market over the observed period. What is more important, in theory, rising prices should be translated on to the consumer, and lead to a higher headline inflation rate, which is a key concern for the ECB. This week, on Friday, German statistics office will publish its inflation figures for June, which are expected to show a slight pickup. Nevertheless, with the latest inflow of disappointing statistics from Germany, and a recent drop in producer prices, the broader measure of inflation is unlikely to surprise markets to the upside.
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