Release Explanation: The PPI measures the rate of inflation of manufacturers when purchasing Goods and Services; the rate of Inflation at the factory Gate. “An increase in the price of raw Goods and services usually gets passed on to the consumer, therefore this is the first stage on Retail Inflation” Trade Team members said Trade Team Thoughts: The Euro-area PPI shows that the pace of inflation is dropping at a sustained pace. Producer prices fell 0.5% in February, following a 1.1% (revised) drop just one month prior.

The PPI read, excluding the energy sector, fell by 0.4% in February, at a similar pace as in the last few months. The year over year PPI read has fallen to -1.8%, from -0.7% in January, the biggest year-over-year drop since 2002. February was the seventh consecutive month in which the index contracted, being the longest streak in more than a decade. Trade Team notes that the release puts additional pressure on the ECB to raise the inflation expectations over the medium term. The drop seen in the last period was huge, since last year, the PPI index toped at 9.2%. According to forecasts, these deflationary pressures will likely be passed on to the CPI, which is also expected to drop below the zero benchmark in the upcoming period.

Forex Technical Reaction: The euro was unmoved by the release. The pair is trading 40 pips above the Asian opening price and close to the TheLFB R1 (1.3525).