USD Rallies After April Producer Price Index Falls For The First Time In 4 Months

By Trang Nguyen,

THETAKEAWAY: U.S. April ProducerPrice Index Declined 0.2%> Easing Inflationary Pressure mightEncourage Additional Stimulus > USDRallies vs. its Major Peers

Wholesale price fell for the first time in four months in April on remarkable declines in energy costs, suggesting an easing inflationary pressure on the U.S. production line.

The seasonally adjusted Producer Price Indexfor finished goods unexpectedly fell 0.2 percent in April afterbeing flatted in March and jumping 0.4 percent in February, theU.S. Bureau of Labor Statistics reported today. Meanwhile, economists surveyed by BloombergNews had anticipated a print that was unchanged from the previousreading . From a year earlier, wholesale prices rose 1.9 percent , below 2 .1 percent gain initially estimated and also the weakestreading since October 2009.

In contrast, the less volatile index,exc luding food and energy, rose 0.2 percent last month in line with consensus forecast, marking thesixth consecutive monthly gain. On a yearly basis, the so-called core producer price index surged 2.7 percent compared with 2.9 percent in the previous month .

The April decrease in finished good index was resulted from 1.4 percent decline in prices for finished energy goods, the largest decline since October 2011. Similarly, the index for intermediate materials, supplies and components edged down 0.5 percent, the first fall since December 2011. The fall is attributable to 2.7 percent decrease in prices for intermediate energy goods. The index for crude materials for further processing also tumbled 4.4 percent in the month due to the broad based declines in prices for crude energy materials (-6.8%), crude foodstuffs and feed stuffs (-3.5%) and crude nonfood materials less energy (-1.8%).

AUDUSD 1-minute Chart: May11 ,2012

Chart createdusing Strategy Trader – Preparedby Trang Nguyen

U.S. dollar immediately gains ground versus most of its major peers in the minutes following the Producer Price Index release. As seen on the 1-minute AUDUSD chart above, the greenback rallied 30 pips versus the Australian dollar from $1.0055 to 1.0025. At the time this report was written, the greenback advances 0.56 percent, trades at $1.0026 per aussie.

--- 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/2012/05/11/051112_US_Producer_Price_Index_April.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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