- Producer Price Index for final demand index drops by 0.2% in June.
- Coronavirus economic impact weighs heavily on PPI data.
- EUR/USD will likely be affected
The U.S. Bureau of Labor Statistics published the Producer Price Index data for June on Friday last week. The results revealed that the PPI for final demand had a 0.2% decline during the month, continuing the declining trend for the past few months. The Bureau of Labor Statistics previously reported a 0.4% decline in May and a 1.3% drop in April.
The PPI decline for the past few months is due to the unfavorable market conditions resulting from the coronavirus pandemic and the economic fallout that it caused. However, one notable thing about the latest data is that the decline is slowing down. This reflects the economic reopening, which has allowed businesses to bounce back, although the markets are still far from achieving normalcy. Economists expected a strong PPI bounce back, but the data indicates that their expectations were off by a huge margin. The consensus estimates projected that the PPI for final demand in June would be around 0.4%, but it instead came in at -0.2%.
EURUSD – Weak Bullish
Technical View :Long Above 1.1339
Target :1.1353, 1.1359
The EUR/USD kicked off Monday morning on a weak bearish performance, which was likely influenced by the unfavorable data. The U.S dollar failed to rally significantly against the Euro, thus the weak bearish performance. The currency pair is expected to trade long above 1.1339, in which case it is expected to test key levels at 1.1353 and 1.1359.
The weak bearish performance of the EUR/USD exchange rate also highlights that the impact PPI data that was announced on Friday may have already run its course. As far as this week’s performance is concerned, the Brexit announcement that the UK plans to exit the EU with or without a favorable deal by the end of the year puts more pressure on the Euro. The German WPI m/m is coming today, and it may set precedence on how the Euro will perform against the U.S dollar this week.