Bitget CFD Chief Analyst: PPI Risks Lie in Cost Transmission Resuming

The upcoming Producer Price Index (PPI) in the United States is seen as a key indicator for assessing whether inflation is on the rise. Lewis Huang, Chief Analyst at Bitget CFD, pointed out that despite the addition of 162,000 non-farm jobs and an unemployment rate of 4.1%, demand in the U.S. remains strong. If core PPI and service prices continue to stay elevated, companies may pass on costs to consumers, which could subsequently drive up the Consumer Price Index (CPI) and prompt the market to reassess the Federal Reserve's policy of maintaining high interest rates. Huang analyzed two scenarios: if PPI exceeds expectations but CPI remains moderate, companies will face profit compression; if both PPI and CPI exceed expectations, it could restart the inflation transmission chain, pushing up the dollar and U.S. Treasury yields. From a trading perspective, if PPI is higher than expected, it may lead to a rise in the dollar, putting pressure on gold and high-valuation tech stocks like the Nasdaq 100; conversely, if PPI is lower than expected, a retreat in the dollar will support a rebound in gold and growth stocks. Huang advises traders to pay attention to market reactions following the data release, observing whether PPI is confirmed by CPI, the dollar, and U.S. Treasury yields. If the rise in PPI is merely a short-term cost shock, the market impact will be limited; however, if costs continue to be transmitted to consumers, the market will shift towards a narrative of persistent inflation and sustained high interest rates.

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