Today the Philadelphia Fed index surged and part of the increase was attributed to a surge in the Prices Paid to 67. 2 from 54.3. The CPI data today also showed increased inflation with the headline number rising by 0.4% and the core rising by 0.2%. Yesterday the PPI increased by 0.8% and the ex food and energy rose by a higher than expected 0.5%.
While the inflation data points higher, the Fed remains ambivalent to it. As a result, good data is leading to lower dollar. Perhaps the Fed and the Chairman are trying to convince corporations to absorb the prices paid component. Perhaps the Fed and the Chairman are trying to keep interest rates from rising too much. Perhaps the Fed and the Chairman want to continue to promote a lower dollar. Perhaps the Fed and Chairman have painted themselves in a corner with FEAR.
Of course, they may be right. Maybe job losses, home price losses and excess will keep prices contained. However, it would be nice if there was even a hint of concern at some point.
Meanwhile, the EURUSD marches higher today and is approaching the next target at the 1.3624 level. This is the 61.8% of the move down from the February high. Not far from that level, channel resistance comes in at the 1.3630 level. I would expect that traders, used to the up and down action of late, will look to take some profit against the level, with stops on a break above.
