PPI numbers were a glimpse into how sensitive the dollar is to inflation

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CPI coming up on Friday

It’s not tough to poke holes in the PPI data despite the biggest gain since February 2012.

Gasoline prices rose by the most in more than two years — a whopping 10.9% and accounted for two-thirds of the goods inflation.

Ex-food and energy, the report was still a tad hot but when you strip out trade, it cools back off. To me that points to imports and the weak dollar as key driver.

Looking at the market, the nuance didn’t matter. The headlines were high and the US dollar climbed. PPI isn’t normally a market mover but the 15-pip USD gain shows how sensitive the market is to prices right now.

That will make tomorrow’s CPI report doubly market moving. These reports tend to move together and I think the reaction is more about preparing for another set of strong headlines tomorrow than anything here.

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