Market Crash Incoming?
This week may be the most important since the year started as the Fed assess the economic outlook and the US presents fresh NFP readings.
Important event for USD: Producer Price Index
What will happen?
The US will publish the Producer Price Index (PPI) on December 14, Tuesday, at 15:30 GMT+2 (MetaTrader time).
Why is it important?
PPI is a leading indicator of inflation which shows the change in the price of finished goods and services by producers. Bigger charges by producers lead to higher costs for consumers and push inflation up. The higher inflation is – the greater the probability that the Federal Reserve will increase the rates. Higher rates, in turn, will push the US dollar up and gold down. This report has become especially significant as the Fed will meet already on December 15, where it may announce the rate hike.
What happened last time?
Last time, the PPI was 0.6% – exactly as analysts expected. It raised concerns that the Fed could leave the rates at the current lows for longer – a bearish factor for the greenback. Thus, the USD dropped and EUR/USD surged by 230 points after the report.
Note that when the USD rises, EUR/USD falls as the USD is a quote currency.
How to trade on PPI?
Open the economic calendar a few days before and check the forecast. If it is significantly higher than the previous figures, the USD can start rising before the event, and vice versa. Then, wait for the actual results to come out.
- If the actual figures exceed forecast levels, the USD will rise.
- If the release disappoints, the USD will fall.
Instruments to trade: all the major pairs and XAU/USD
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