- James Bullard, Federal Reserve Bank of St. Louis President
A report from the Labor Department was not expected to provide a significant boost to the greenback's exchange rate, however, as the most traded currency pair was locked in a tight range slightly above 1.35-mark. Nevertheless, the PPI gives a clear insight on the upcoming CPI report this week, and will most likely be mentioned by the Federal Reserve's officials.
The single currency failed to benefit from disappointing retail sales and producer prices, as the Euro is under a significant pressure caused by the ECB. The Producer Price Index stood at –0.2% in May from a month earlier. Analysts expected a 0.2% increase, while the indicator posted a significant slowdown from March's 0.6% gain. On a yearly basis, the PPI climbed 2%. A measure of core PPI sank 0.1% over the corresponding period.
The Federal Reserve is keeping a close eye on inflation reports as they roll back their monthly asset purchases and start debates on when to make the first hike. Earlier this year, they have encouraged investors that tightening process will not begin until mid-2015. Despite sluggish growth in the first quarter, the overall picture is promising– the labour market is on the mend, the economy is expanding for five years, while price pressures are mounting. All these factors, according to Fed's Bullard, should force the Fed to start raising interest rates sooner than expected.
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