THE TAKEAWAY: Euro-Zone PPI fall 0.5% during May -> Energy prices drop 1.4% -> Euro consolidates in today’s trading
Euro-Zone producer prices fell by 0.5% during the month of May, the biggest drop in 3 years and lower than the analysts’ expectations for a -0.3% drop. Annually, May’s producer-price inflation is 2.3% higher according to Eurostat.
Energy prices fell by 1.4% as producer prices for capital and durable consumer goods remained unchanged in May. Germany’s PPI was down 0.3% while France’s producer prices fell 1.1%.
The lower prices combined with the economic pressures that we were again reminded of yesterday, when PMI for manufacturing indicated further drops in output, are a recipe for monetary action in this Thursday’s ECB meeting. The average expectation by Bloomberg surveyed analysts is for a 25 basis point rate cut to 0.75%.
EURUSD has consolidated in today’s trading slightly below 1.2600 following last Friday’s rally and Monday’s reversal of those gains. Euro dropped slightly following the lower than expected PPI, but still remains well within today’s range.
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