FOREX: DXY Off Best Levels, But Broadly Consolidating Post-Fed Upswing

Spain PPI inflation accelerated strongly to 8.3% Y/Y in April (after 3.1% Mar, -6.9% Feb) for its highest since December 2022. This was of course mainly driven by energy, but the ex-energy index also saw decent jump to 2.6% Y/Y (1.2% Mar, 0.9% Feb), mainly on intermediate goods (led by chemicals, fertilisers, plastics, rubber) but with consumer and capital goods inflation also accelerating.

• While the step up from March was broad-based, energy was the main upward driver: energy producer prices rose 22.3% Y/Y (7.1% Mar), intermediate goods 3.8% Y/Y (0.8% Mar), consumer goods 1.6% Y/Y (1.2% Mar), and capital goods 2.0% Y/Y (1.8% Mar).
• Within energy, the main driver was oil refining prices which rose 70.1% Y/Y (42.9% Mar), helped further by a base effect from a -7.3% M/M drop this time last year. Also contributing here was electricity production/transmission/ distribution (9.3% Y/Y after -5.1% Mar).
• Away from energy, the rise in intermediate goods inflation was mainly due to "basic chemicals, fertilisers and nitrogen compounds, plastics and synthetic rubber in primary forms", which rose 14.2% Y/Y after -3.4% Mar (helped by a base effect from a -2.4% M/M drop in April last year).
• On a monthly basis, PPI growth slowed to 1.7% M/M (6.2% Mar). Still, the monthly rise was primarily driven by oil refining (10.3% M/M, contributing +1.19ppt to the monthly rate), though this did slow from the prior 46.3% M/M rise. Monthly growth was also helped by chemicals/fertilisers/plastics/rubbers in primary form (15.4% M/M, contributing +0.42ppt). Partially offsetting these was production/transmission/distribution of electricity (-3.1% M/M contributing -0.44ppt).
• Friday sees May flash HICP, alongside flash inflation prints for Germany, France and Italy, as markets continue to price two ECB hikes through year-end with a June hike on the cards.

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