German PPI Numbers Signal Sticky Inflation Despite Falling Oil Prices

It was a relatively busy start to the day on the European economic calendar. German producer price index figures drew interest, with inflation still a hot topic among central bankers.

The German producer price index fell by 0.3% in February versus a forecasted 0.5% decline. In January, the producer price index declined by 1.0%. Year-over-year, the producer price index rose by 15.8% versus an expected increase of 14.5%. In January, the index increased by 17.6%.

According to Destatis,

• Compared with February 2022, the highest contribution came from energy prices.
• Energy prices rose by 27.6% year-over-year attributable to natural gas (distribution) prices.
• Year-over-year, natural gas prices rose by 38.9%
• In contrast, energy prices were the main drag on the index in February, falling by 1.4%. Prices of natural gas were the main drag.

With the ECB shifting to a data-dependent policy approach, today’s numbers may force the ECB to rethink taking its foot off the gas.

EUR/USD Price Action

Ahead of the producer price index numbers, the EUR/USD rose to an early high of $1.06900 before falling to a low of $1.06588.

However, in response to the stats, the EUR/USD rose to a post-stat high of $1.06811 before sliding to a low of $1.06418.

This morning, the EUR/USD was down 0.11% to $1.06543.

Next Up

Later in the session, euro area trade data will provide further direction. Economists forecast the trade deficit to widen from €8.8 billion to €12.5 billion in January.

However, with investors treading carefully after the Credit Suisse Group AG close call, investors should also monitor ECB member speeches. ECB President Lagarde will speak today, with comments on inflation, monetary policy, and the banking crisis likely to garner interest.

Away from the economic calendar, banking sector-related news will also influence following the UBS AG (UBS) agreement to acquire Credit Suisse Group AG (CS).

Hopes of the global economy avoiding a recession stemming from synchronized central bank monetary policy tightening have faded. The banking crisis has shown the effect of tightening monetary policy on the financial sector that could have wider-reaching implications.

Looking ahead to the US session, it is a quiet day on the US economic calendar. There are no US economic indicators for investors to consider. The lack of stats will leave bank-related news and sentiment toward the Fed to provide direction.

However, there are no FOMC member speeches to consider. The Fed entered the blackout period on Saturday, leaving investors to consider how the Fed will respond to the banking sector crisis.