January’s U.S. PPI report came in hotter than expected, rising 0.4% month-over-month (vs. 0.3% forecast) after an upwardly revised 0.5% increase in December.
On an annual basis, PPI maintained a 3.5% increase from a year ago when market players saw it inching lower to 3.4%.
Link to the official U.S. PPI Report (January 2025)
Notable components of the report included:
- Egg prices soared 44.0% amid an avian flu outbreak
- Diesel fuel prices jumped 10.4%
- Hotel and motel rates climbed 5.7%
- Securities brokerage services fell 2.2%
- Fresh and dry vegetable prices plunged 22.3%
But several components tied to the U.S. core PCE price index, the Fed’s preferred inflation gauge, showed some moderation:
- Healthcare services:
- Physician care costs dipped 0.5%
- Hospital outpatient care fell 0.4%
- Hospital inpatient care declined 0.3%
- Transportation:
- Airline passenger services edged down 0.3%
- Financial services:
- Portfolio management fees rose modestly by 0.4%
- Securities brokerage and investment services dropped 2.2%
The report followed Tuesday’s hotter-than-expected CPI data, but traders seemed more focused on how wholesale prices feed into future inflation trends.
Meanwhile, weekly jobless claims dipped to 213,000, keeping the narrative of controlled inflation alongside a strong labor market intact.
U.S. Dollar vs. Major Currencies: 5-min
Overlay of USD vs. Major Currencies Chart by TradingView
The U.S. dollar edged higher by the European session break but dropped sharply after the softer headline PPI readings. That move was short-lived, though, as traders quickly refocused on the hotter-than-expected details, pushing USD back up.
By the U.S. session open, momentum had shifted again. Traders zeroed in on the components tied to the Fed’s core PCE price index, and the dollar’s slide was likely reinforced by the weekly jobless claims report, which showed claims falling to 213,000—another sign of a steady labor market.
With inflation components showing moderation and labor market conditions holding firm, traders maintained their Fed rate cut expectations for this year, even as the timeline moved from June to September/October.
This kept the dollar under pressure throughout the session, fueling a steady decline across multiple USD pairs until Trump announced his tariff updates around the London session close.
