The PPI data let the cat out of the bag.
If tariffs collected are filling the US treasury with $29B per month, that implies a price increase somewhere (or someone has to pay).
- Does the exporter eat the tariffs by cutting the cost of their goods into the US?
- Does the importer eat the costs at the expense of margins?
- Does the consumer pay the cost in the form of higher prices?
The CPI was relatively tame. The PPI was not. The cost is showing up in the producer prices. That makes sense on the surface.
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CNBC Cramer is questioning the numbers, however, saying that the numbers don’t make sense, given anecdotal information. He cites transportation and warehouses cost which are up despite the fact that there are no people in warehouses and the process is automated. Of course, it is one thing but as the economy changes, is the data not reflecting the efficiencies from technology? Is it old school vs the new school? Does it need a redo? Does the data need to be looked at closely and the question asked, “Does it make sense?”
Regardless, the question is, “If there is increased costs, do those increased costs trickle down to the consumers?”
What we know is that Fed Powell has HIS proof that inflation is moving higher from the data, and has the potential to move higher for the consumer. What we don’t know, however, is it now done? Is that the one time impact from inflation? Or will it lead to a racheting up in prices, that begets a racheting up and begets an even more racheting up of prices and costs? The beliefs – from the market – are not concerned, as the expectations are still for 56 basis points of cuts between now and the end of the year and a 93% chance for a cut in September.
Looking at the markets, the USD has moved higher off the news:
EURUSD: The EURUSD moved from 1.16807 to 1.1648. That took the price below is 100 hour MA and 61.8% at 1.16615. The price is trading right around the confluenced levels now. Watch that level for technical clues. ON the downside, the 200 hour MA comes in at 1.16339. Moving below it will add to the bearish bias.
USDJPY: The USDJPY was lower into the release after breaking below a confluence of technical levels between 147.05 to 147.135 (200 bar MA on the 4-hour, trend line and the 38.2% of the 2025 trading range). The price high has reached 147.095. So far, the sellers are leaning against confluence of technical levels. Move above disappoints the sellers. Stay below keeps them in play.
GBPUSD: The GBPUSD moved higher this week but moved into a swing area target between 1.3576 to 1.35918 yesterday and today and stalled. The price action coming into the data was above a lower swing level at 1.3561. Traders were waiting for a shove.
That shove was to the downside, with the price moving below the 1.3561 level. The low, however, has so far stalled ahead of the 61.8% of the move down from the July 1 high a 1.35397. The low reached 1.3545 so far. A move below the 61.8% would give sellers more confidence. Watch that level and the 1.3561 on the topside as the market jumps toward the next target, but not with lots of certainty or authority. Overall, there has been a step lower, but it was not a big one, which is concerning. Get below the 61 8% feels better for the sellers.
US stocks ahead of the open shows:
- Dow -161 points
- S&P -26.25 points
- Nasdaq -118 points
US yields are higher moving from down -2 to -3 basis points to up 1.2 to 4.0 basis points.
- 2-year 3.728% +3.9 basis points
- 5 year 3.802% +3.0 basis points
- 10 year 4.261% +2.2 basis points
- 30 year 4.84% +1.2 basis points
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