Producer Price Index Flatten,Trade Deficit Shrunk; USD Rally To Be Short-Lived

By Trang Nguyen,

THE TAKEAWAY: U.S. March Producer Price Index Flat, February Trade Deficit Narrowed > Moderated Inflationary Pressure on Production Line > USD Rally to be Short-Lived

The report issued by the U.S. Bureau of LaborStatistics today showed a moderated inflationary pressure on production line in March since a drop in gasoline costs offset rising foodprices. The seasonally adjusted Producer Price Indexfor finished goods unexpectedly flat in March after jumping 0.4 percent in February and advancing 0.1 percent inJanuary . Meanwhile, economists surveyed by BloombergNews had anticipated a rise of 0.1 percent. From a yearearlier, wholesale prices edge d down 2.8 percent, lower than 3 .1 percent estimated .

In contrast, the less volatile index, excludingfood and energy, rose 0.3 percent last month amid consensus forecast of merely 0.2 percentincrease, marking the fifth consecutive monthly gain. The gain wasmainly attributable for light motor trucks prices, which rebounded0.7 percent after falling 0.4 percent in February. On a yearly basis, the so-called core producer price index surged 2.9 percent, above 2.8 percent initiallyprojected.

The separated report release d by the Commerce Department at the same time reveal ed that trade deficit narrowed 12 percent to $4 6 billion in February , the s mallest since October. The print is better thanexpected as economists called for an imbalance of $51.8billion. February’s deficit was revised lower to $ 52.5 billion from $ 52.6 billion initially reported.

The U.S. trade gap shrank in February as imports of goods and services slipped more than exports. December imports declin ed $ 6.3billion to $227.2 billion, reflectingwidespread drop in all major goods categories, led by a decrease inconsumer good and industrial supplies. Meanwhile, exports slightly fell $ 0.6 billion $ 181.2 billion as U.S. firms sold less automotive vehicles , consumer goods and foods, feeds and beverages to internationalmarket.

AUDUSD 1-minute Chart: April 12 ,2012

Chart createdusing Strategy Trader – Preparedby Trang Nguyen

U.S. dollar loses ground versus most of its major peers except its Japanese counterpart ahead of an opening bell in North American trade session today amid surge of risk appetite. The reserve currency briefly pared loss minutes before and after Producer Price Index and Trade Balance reports release. As seen on the 1-minute AUDUSD chart above, the greenback rallied 20 pips versus the aussie within 15 minutes. The currency pair then quickly corrected after that as the Autralian dollar regains, trades at $1.03898 at the time this report was written.

--- Written by Trang Nguyen, DailyFX Research Team for DailyFX.com

To contact Trang, email tnguyen@dailyfx.com
DailyFX is the forex news and research arm of FXCM, Inc (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

Original Article: http://www.dailyfx.com/forex/market_alert/2012/04/12/041212_US_Producer_Price_Index_March_and_Trade_Balance_February.html

DailyFX is the forex news and research arm of FXCM (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

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