USD/CAD – US PPI lower than expectations

on Aug 14, 2013

**, Wednesday 14 August:**

The US Producer Price Index for July m/m stayed unchanged, well below forecasts for 0.3 percent growth and June’s 0.8 percent growth figure. Year-on-year the index has increased 2.1 percent, worse than analysts’ expectations for 2.4 percent growth and June’s 2.5 percent.
There was a surprise drop in energy costs for producers and flat growth of food prices, however the Core PPI that excludes food and energy prices still remained below forecasts.

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The Core PPI for July m/m was today reported as showing growth of 0.1 percent, falling short of analysts’ estimates for growth equal to June’s 0.2 percent. And finally, on an annual basis the Core PPI at 1.2 percent growth disappointed expectations for 1.3 percent after the prior period’s 1.7 percent advance.
The FOMC July announcement carried a cautionary tone on the risk of disinflation with the CPI persistently remaining below the two percent target. This phenomenon “could pose risks to economic performance” according to the committee. The Fed believes inflation will pick-up by the end of the year, however the disappointing PPI release today contradicts that stance.

Tomorrow’s CPI release at 13.30 will be widely anticipated as indicative of whether or not the inflation outlook remains excessively low, implying that ‘’tapering’’ might not happen in September.
After reaching 1.0370 at the start of European trading, USD/CAD has reversed and declined for the rest of the day. Currently the pair is holding around 1.0326 and 0.2 percent down for Wednesday.


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