Producer prices in the U.S. added 0.3% in June, increasing the annual growth rate to a seven-year high of 3.4%. Core Producer price index (ex food and energy) has accelerated to 2.8% YoY (also the highest rate since 2011). The increase in fuel prices is now spreading through the economy and is already pulling up prices for other categories.
The expectations from tomorrow’s publication of consumer prices are also likely to be increased, confirming the CPI acceleration.
In theory, inflation acceleration should return to the markets fears of more active rate increases from the Fed. However, this current news looks moderately optimistic, as the business raises prices when they are able to do so. Therefore, it is the signal that the U.S. economy is healthy.
The U.S. dollar slightly weakened its position after PPI release. EURUSD reached intraday highs at 1.1750. S&P500 weakened a little shortly after the release of the following interest rates growth. However, the main driver for the markets remains the threat of new tariffs between China and the United States.