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Energy Costs Push Euro-Zone Producer Prices Higher

Energy Costs Push Euro-Zone Producer Prices Higher

Benjamin Spier, Technical Strategist

THE TAKEAWAY: Euro-zone PPI reported at 0.4% in July, beats expectations -> Energy costs push producer prices higher -> Euro trading steady

Following two months of declining prices, the input costs for producers in the Euro-zone rose by 0.4% in July. The Producer Prices Index for July was higher than expectations for a 0.2% rise and followed June’s 0.5% decline in producer prices. The PPI remained 1.8% higher on an annual basis according to Eurostat.

Much of the increase in price was due to a 1.6% rise in energy prices for producers in July. Industry prices excluding energy were only 0.1% higher. Greece saw a 2.1% increase in producer prices in July, while Irish prices were down 0.8%.

The higher producer prices fall in line with a rising annual inflation rate that was reported last week. The higher inflation reduces the chances that the European Central Bank will decide to cut interest rates in their next meeting and therefore could be currency positive.

However, the Euro did not react to the higher than expected PPI. Since EURUSD crossed above 1.2600 last week, which had provided resistance in the preceding weeks, the key level has provided support for the pair. A month long rising trend line could now provide resistance around 1.2628.

EURUSD 15-minute: September 4, 2012

Energy_Costs_Push_Euro-Zone_Producer_Prices_Higher__body_eurusd_daily_chart.png, Energy Costs Push Euro-Zone Producer Prices Higher

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