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Producer Price Index Flatten,Trade Deficit Shrunk; USD Rally to be Short-Lived

Producer Price Index Flatten,Trade Deficit Shrunk; USD Rally to be Short-Lived

Trang Nguyen,

THE TAKEAWAY:U.S. March Producer Price Index Flat, February Trade Deficit Narrowed > Moderated Inflationary Pressure on Production Line>USD Rally to be Short-Lived

The report issued by the U.S. Bureau of Labor Statistics today showed a moderated inflationary pressure on production line in March since a drop in gasoline costs offset rising food prices. The seasonally adjusted Producer Price Index for finished goods unexpectedly flat in March after jumping 0.4 percent in February and advancing 0.1 percent in January. Meanwhile, economists surveyed by Bloomberg News had anticipated a rise of 0.1 percent. From a year earlier, wholesale prices edged down 2.8 percent, lower than 3.1 percent estimated.

In contrast, the less volatile index, excluding food and energy, rose 0.3 percent last month amid consensus forecast of merely 0.2 percent increase, marking the fifth consecutive monthly gain. The gain was mainly attributable for light motor trucks prices, which rebounded 0.7 percent after falling 0.4 percent in February. On a yearly basis, the so-called core producer price index surged 2.9 percent, above 2.8 percent initially projected.

The separated report released by the Commerce Department at the same time revealed that trade deficit narrowed 12 percent to $46 billion in February, the smallest since October. The print is better than expected as economists called for an imbalance of $51.8 billion.February’s deficit was revised lower to $52.5 billion from $52.6 billion initially reported.

The U.S. trade gap shrank in February as imports of goods and services slipped more than exports. December imports declined $6.3billion to $227.2 billion, reflecting widespread drop in all major goods categories, led by a decrease in consumer good and industrial supplies. Meanwhile, exports slightly fell $0.6 billion $181.2 billion as U.S. firms sold less automotive vehicles, consumer goods and foods, feeds and beverages to international market.

AUDUSD 1-minute Chart: April12, 2012

041212_US_Producer_Price_Index_March_and_Trade_Balance_February_body_Picture_2.png, Producer Price Index Flatten,Trade Deficit Shrunk; USD Rally to be Short-Lived

Chart created using Strategy Trader – Prepared by Trang Nguyen

U.S. dollar loses ground versus most of its major peers except its Japanese counterpart ahead of an opening bell in North American trade session today amid surge of risk appetite. The reserve currency briefly pared loss minutes before and after Producer Price Index and Trade Balance reports release. As seen on the 1-minute AUDUSD chart above, the greenback rallied 20 pips versus the aussie within 15 minutes. The currency pair then quickly corrected after that as the Autralian dollar regains, trades at $1.03898 at the time this report was written.

--- Written by Trang Nguyen, DailyFX Research Team for

To contact Trang, email

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.