USD Retreats After Softer US Inflation PPI for July

Today the US PPI producer inflation showed a decline from last month, which is contributing to the USD weakness in the US session. Headline PPI inflation fell from 2.7% in June to 2.2% in July, also beating expectations of 2.3%, so traders are expecting other inflation reports to continue the declining trend as well.

This report is important for understanding trends that will be reflected in the upcoming Personal Consumption Expenditures (PCE) report, which includes some of these components from the Producer inflation report. However, today’s PPI data will not likely have a direct influence on the Consumer Price Index (CPI) figures set to be released tomorrow.

US Producer Price Index (PPI) – July 2024 Summary

• PPI Final Demand:

  • Month-over-month (MoM): +0.1% (vs. +0.2% expected)
  • Year-over-year (YoY): +2.2% (vs. +2.3% expected)
  • Previous month revised to +2.7% YoY (from +2.6%)

• PPI Excluding Food and Energy:

  • MoM: 0.0% (vs. +0.2% expected)
  • YoY: +2.4% (vs. +2.7% expected)
  • Previous month: +3.0% YoY

• PPI Excluding Food, Energy, and Trade:

  • YoY: +3.3% (revised from +3.1%)
  • MoM: +0.3% (vs. +0.1% last month, revised from 0.0%)

Final Demand Breakdown:

• Goods:

  • Overall: +0.6% MoM, the largest increase since February’s +1.1%, with nearly 60% of the rise attributed to energy costs (+1.9%).
  • Foods: +1.1%
  • Energy: -1.4%
  • Goods excluding food and energy: +1.8% YoY

• Services:

  • Overall: -0.2%, marking the largest decline since March 2023, driven by a -1.3% drop in trade services.
  • Trade services: +2.7% YoY
  • Transportation and warehousing: +0.2%
  • Services excluding trade, transportation, and warehousing: +4.2% YoY

• Construction:

  • Prices decreased by 0.6% YoY

But, treasury yields have declined, with the 10-years down by 2.70% to 3.80%, and the 2-year yield dropping by four basis points, falling below 4%. This decline in yields has weakened the US dollar, with EUR/USD gaining over 40 pips.

ABOUT THE AUTHOR See More

Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.

Related Articles

Forex Signals Brief Feb 4: JOLTS Jobs Don't Matter When Markets Trade Politics

5 mo ago

Save

Euro Heads to Parity After Failed Bounce, Dax Keeps Making Record Highs Despite Trade Worries

5 mo ago

Save

Forex Signals Brief Feb 3: EZ Inflation to Weigh on Euro After trade Tariffs

5 mo ago

Save