German Producer Price Index Unexpectedly Rises in April

It is a relatively busy day ahead on the European economic calendar. German producer price numbers for April were in focus this morning. With sticky inflation forcing the ECB to take a more hawkish outlook on monetary policy, hotter-than-expected wholesale inflation numbers could signal a summer interest rate hike.

The German Producer Price Index rose by 0.3% in April versus a forecasted 0.5% decline. In March, the Index slid by 1.4%. Year-over-year, the Index was up 4.1% versus 6.7% in March. Economists forecast a 4.0% rise.

According to Destatis,

• Compared with April 2022, producer prices for capital goods increased by 6.8% and by 0.6% month-on-month.
• Vehicles and parts prices rose by 5.6% year-over-year and 0.9% compared to March 2023.
• Prices for non-durable consumer goods were up 11.4% compared with April 2022, with food prices rising by 13.6%.
• Durable consumer goods prices increased by 8.8% year-over-year and 0.2% month-on-month.
• Significantly, energy prices were 2.8% higher than in April 2022, with energy prices up 1.0% in April 2023. Energy prices increased for the first time since September 2022.

EUR/USD Reaction to German Producer Price Index Slide

Ahead of the German wholesale inflation numbers, the EUR/USD rose to a high of $1.07802 before falling to a pre-stat low of $1.07600.

However, in response to the producer price index numbers, the EUR/USD fell to a post-stat low of $1.07670 before rising to a high of $1.07757.

This morning, the EUR/USD was up 0.04% to $1.07757.

Next Up

After a week of mixed signals economic data front, investors should monitor ECB chatter throughout the day. ECB Executive Board members Isabel Schnabel and ECB President Christine Lagarde (pre-recorded) are on the calendar to speak today.

The ECB will also release the ECB Economic Bulletin, which will garner much interest following the EU Commission’s revisions to growth and inflation forecasts.

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 market risk sentiment and Fed chatter to influence investor sentiment.

FOMC members Williams and Bowman will set the stage for Fed Chair Powell to wrap up the week. The Fed Chair has caught investors by surprise on numerous occasions. Sticky inflation and very tight labor market conditions could force Powell to discuss the possibility of a June interest rate hike.

Beyond the economic calendar, US debt ceiling-related news will move the dial.