The seasonally adjusted Producer Price Index for final demand rose 0.3% in February, the Bureau of Labour Statistics revealed on Tuesday. Over 80% of the increase in final demand Index was associated with 0.4% advance in prices for final demand services. The Index for final demand goods, in contrast, advanced only 0.3%. The surge in final demand services was mainly driven by traveller accommodation services, which increased 4.3%, while the rise in final demand goods was mostly attributable to higher electric power prices, which rallied 1.6%. In general, the price advance for total final demand in February was half of the January rise. With respect to intermediate demand, prices for unprocessed goods plunged 0.2%, while prices for processed goods jumped 0.4% and prices for services climbed 0.5%. Prices of processed goods posted the sixth straight monthly increase, driven by a 0.5% spike in prices for processed materials less foods and energy.
In contrast, the surprising fall of prices for unprocessed goods was attributed to a 4.3% drop in the price of unprocessed energy materials. In terms of products, the rise of prices for processed goods was attributable to higher demand for primary basic organic chemicals and higher services prices. The slip of prices for unprocessed goods was triggered by lower natural gas prices, which went 18% down.
US CPI, Retail Sales and Federal Funds Rate decision
GBP/USD in limbo around 1.22 ahead of Fed Minutes
The GBP/USD pair was close to touching the 1.21 mark on Tuesday, the lowest level in two months; however, it was able to stabilise above the 1.2150 mark. A sharp rebound was registered earlier today, but the cause of it is USD weakness rather than GBP strength, with US Treasury yields weighing on the US currency. A lot can change after Fed's Minutes are released, which is the main market driver today. First of all, the Cable risks falling under 1.21, should the Fed deliver on a rate hike and provide insight concerning future ones this year. On the other hand, any disappointment would help the Pound regain some ground, with the 1.23 easily seen retaken.
Daily chart
Hourly chart
Traders mostly bullish
Bullish traders' sentiment grew stronger, as now 68% of all open positions are long. The share of buy orders edged up from 50 to 56%.
A slightly more optimistic situation is observed elsewhere. For example, 67% of positions open at OANDA are currently long. This is more than the share of shorts (33%), barely sufficient for the sentiment to be called bullish. Meanwhile, sentiment at Saxo Bank is also bullish, with 68% of traders now being long and the other 32% being short the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders expect the Cable to keep falling
By the end of the next three months traders expect the Cable to fall under the 1.22 major level, as 52% of survey participants believe so. While the current price is around 1.22, the average forecast for June 15 is 1.2342. The 1.18-1.20 and the 1.20-1.22 ranges are now the most popular price intervals, with all three having 15% of the votes, while on the second place are 1.14-1.16 and the 1.28-1.30 price ranges, both with 13% of poll participants choosing them. Furthermore, the 1.30-1.32 interval was chosen by 11% of the voters.