US Producer Prices up 0.8%, Unemployment Rolls Nearing 5M

Last updated 2/19/2009 9:18 AM ET (GMT -5) 0 Comments - Add your comment

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Kathy Lien

Director of Currency Research, GFT

The US dollar strengthened briefly following this morning's inflation and employment reports. Headline producer prices rose for the first time since August while core prices increased 0.4 percent.  

Jobless claims held steady at 627k, which was slightly worse than the market expected.  Despite the stronger inflation dataa,  we are very concerned about the jump in continuing claims.  The number of Americans on unemployment rolls have reached 4.987 million, just shy of the psychologically crippling 5 million mark.  The less volatile four week moving average also rose by 11k to 619k.  

Given the weakness of consumer demand and the Fed's warning about lower prices, the rise in PPI should be a one off increase.  The biggest contributor was gasoline prices, which are less sensitive to consumer demand than market values.  The PPI data does not draw away from the Fed's deflation fears. In the following video of Bernanke's speech yesterday, he said the Fed sees "little risk of unexpectedly high inflation in the medium term and indeed, we expect inflation to be quite low for some time."   Despite the uptick in PPI, there is little risk of inflation at this point. 

The gains in the dollar should be fleeting because the jobless claims data confirms that we are on our way to 8 percent plus unemployment. 

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About The Author

Kathy Lien began her FX trading career 10 years ago at J.P. Morgan Chase. After graduating New York University’s Leonard Stern School of Business at the age of 18, Kathy joined the bank's interbank FX trading desk and eventually moved to the cross markets proprietary trading desk. In the interbank market, her ability to create solid fundamental and technical analysis from the myriad of information on the market helped her trade forex spot and options. Her experience eventually led her to be chief strategist at Daily FX where she worked until she joined GFT in 2008.

With her knowledge of forex, as well as her experience trading other products, such as interest rate derivates, bonds, equities, and futures, Lien has built a reputation as an international currency analyst. She is frequently quoted on CNBC, Bloomberg, Fox Business and Reuters. Lien has also written for publications like Active Trader, Futures, and SFO magazine. She is the author of the newly updated Day Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Boris Schlossberg.

To buy Kathy’s newly updated Day Trading and Swing Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, click here.