EUR/USD: Correction Continues

 | Oct 15, 2021 07:49AM ET

The US PPI results have halted a frenzy triggered by the inflation report. Producer prices in the United States increased to 8.6% from 8.3% and above market forecasts of 8.5%. Given that the PPI is considered a leading indicator for inflation, its growth means that inflation is unlikely to slow any time soon. In fact, it may well accelerate.

That is why the Federal Reserve will have no other choice but to announce QE tapering in November. It actually became clear after the release of the inflation report. However, the market anyway tried to keep alive the hope that the regulator would delay the decision until December at least. Anyway, the PPI has put everything in perspective and the weakening of the dollar has ended.

Still, market participants expect USD to be bearish. Moreover, jobless claims data in the US came well above market expectations, thereby confirming the inevitability of monetary policy tightening by the Federal Reserve. Thus, the number of initial jobless claims dropped by 36K, whereas the reading was expected to fall by 14K. Meanwhile, continuing claims plunged by 134K compared with the forecast of a 78K decrease. Given all that, the greenback was supposed to show more impressive growth. Yet, it did not happen. It was just that the dollar was no longer weakening.

h2 United States PPI: