THE TAKEAWAY: Euro-zone PPI for June drops 0.5%, more than expected -> ECB quotes steady inflation as reason for monetary action -> Euro trading higher
Euro-zone producer prices fell 0.5% in June for the second straight month, continuing the sharpest drop in prices in 3 years, and coming in lower than analysts’ expectations for a 0.4% drop in the Producer Price Index. Producer prices also rose 1.8% when compared to June 2011, according to Eurostat.
Excluding the energy sector, producer prices only fell by 0.1% in June, while energy sector prices declined 1.8%. Durable consumer goods prices remained stable, while capital and non-durable consumer goods prices increased 0.1%.
Earlier this week, annual inflation was seen as remaining steady in June. The European Central Bank said that the declining inflationary pressures combined with the lack of growth led them to cut the interest rate in their July meeting.
Although another interest rate cut is not expected today, many investors are looking for the ECB to take action in their meeting today to back up President Draghi’s comments that they will preserve the Euro by any means that are necessary
The Euro actually rose slightly against the US Dollar following the PPI release, possibly in anticipation for the ECB meeting. EURUSD has reversed much of yesterday’s losses and is inching back towards 1.2300 in today’s session. The psychological 1.2300 line could provide resistance.
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