How does the producer price index affect the foreign exchange market?

The PPI index is an indicator of inflation and shows in advance the whole trend of this problem in the financial environment, which allows governments to take the necessary measures in economic policy, and on the stock market - there is a hint in long-term trading.

Market participants pay a lot of attention to the PPI reports, as they indicate trends in the development of production and can predict the future CPI.

If manufacturers start raising prices for their products, this difference is likely to be reflected in the final prices for the consumer, which will affect the performance of the CPI index. Since CPI is one of the most important economic indicators, market participants carefully analyze the previous PPI to get an idea about the future of CPI.