Why are Forex traders waiting for the PPI red folder?

Hello everyone

Today I was reviewing the economic calendar when I came across a very important item and decided to share my analysis with you.One of the most important events on the economic calendar that you should pay special attention to today is the release of the Core PPI index, or the "Core Producer Price Index". We are facing a High Impact news that has the potential to cause severe and rapid fluctuations in the market.

But why is this news so important to traders?

The PPI actually measures the pulse of inflation at the factory and producer level. The word “core” tells us that spurious fluctuations in food and energy prices have been removed to give a more accurate picture of underlying inflation.

Direct effect on the dollar (USD):

The market logic is simple: if the cost of production increases for the manufacturer, he will eventually pass this cost on to the consumer by making his products more expensive. This means that a high PPI is a precursor to higher inflation (CPI) in the future.

Bullish scenario: If the actual number released is 0.3% higher than expected, the market will see it as a sign that the Federal Reserve will continue its tight policy, which will strengthen the dollar.

Bearish scenario: A lower-than-expected number could understate inflationary pressures and cause a temporary weakness in the dollar.

An important analytical point:

Today's report includes a special note (FF Notice); the data was released 15 days late due to the US government shutdown. This delay has made traders more sensitive to this number, as they are hungry for accurate information on the state of inflation during a period when data was not released regularly.

The impact of previous numbers on the market: