The U.S. Producer Price Index (PPI) MoM release is tomorrow (14:30).
In this idea I will talk about what it is and how we can make money of this as traders :)
What the # is PPI?
The Producer Price Index (PPI) measures the price change on the manufacturing side.
In contrast to CPI, Consumer Price Index, which measures what consumers pay for their stuff!
So, the PPI covers the price changes of the sellers and that is why it is widely considered as one of the most important indicators for inflation.
How does PPI influence the dollar?
When the PPI rises, this sends a message to the fed that inflation may be taking place so they should raise interest rates to 'fight' this inflation.
The interest rates hikes generally lead to higher value of the dollar.
Rising PPI = signal of inflation = policy of higher interest rates = more attractive to investors = dollar is more in demand = increase in value
Same things goes for the other side:
Low PPI = low indicator for inflation = message to fed to ease up with the rate hikes = lower interest rate = Generally bearish for the dollar.
So always buy the dollar when PPI rises?
NO! You should also take a look at the monetary policy of the counter currencies countries. Because lower interest rates in USA generally DON'T mean a decrease in the dollar value for USD/JPY if the interest rates are even MORE lowered in japan.
Conclusion
To be honest, the best way to 'make' money in the long term during major news events is to not trade at all. Because of the major volatility spike you can lose money very quickly and there is also have very high risk of slippage on your trades. Trading big news events is like gambling and that's not what we do. Maybe you experience a little bit of FOMO when you see the beautiful big moves that you 'could have gotten into' but it WILL pay off in the long run to avoid trading during major news events.
I give daily ideas about market analysis, trading psychology and trading in general.
❤️ If you appreciate my work, please like, comment, follow and send to someone you think should read this. ❤️
If you don't then don't! :)
@yorick7878
I wish you all good trading!
In this idea I will talk about what it is and how we can make money of this as traders :)
What the # is PPI?
The Producer Price Index (PPI) measures the price change on the manufacturing side.
In contrast to CPI, Consumer Price Index, which measures what consumers pay for their stuff!
So, the PPI covers the price changes of the sellers and that is why it is widely considered as one of the most important indicators for inflation.
How does PPI influence the dollar?
When the PPI rises, this sends a message to the fed that inflation may be taking place so they should raise interest rates to 'fight' this inflation.
The interest rates hikes generally lead to higher value of the dollar.
Rising PPI = signal of inflation = policy of higher interest rates = more attractive to investors = dollar is more in demand = increase in value
Same things goes for the other side:
Low PPI = low indicator for inflation = message to fed to ease up with the rate hikes = lower interest rate = Generally bearish for the dollar.
So always buy the dollar when PPI rises?
NO! You should also take a look at the monetary policy of the counter currencies countries. Because lower interest rates in USA generally DON'T mean a decrease in the dollar value for USD/JPY if the interest rates are even MORE lowered in japan.
Conclusion
To be honest, the best way to 'make' money in the long term during major news events is to not trade at all. Because of the major volatility spike you can lose money very quickly and there is also have very high risk of slippage on your trades. Trading big news events is like gambling and that's not what we do. Maybe you experience a little bit of FOMO when you see the beautiful big moves that you 'could have gotten into' but it WILL pay off in the long run to avoid trading during major news events.
I give daily ideas about market analysis, trading psychology and trading in general.
❤️ If you appreciate my work, please like, comment, follow and send to someone you think should read this. ❤️
If you don't then don't! :)
@yorick7878
I wish you all good trading!