Can CPI Follow PPI Lead?

13 October, 2017

In early Friday trading, the markets are relatively static as they wait, in anticipation, for today’s US inflation data that will potentially give confirmation that the FOMC will hike interest rates in December. According to the latest CME FedWatch tool, there is an 88% probability of a rate hike in December.

Thursday’s release of US PPI for September showed producers experiencing a 0.4% increase, in line with expectations, after a 0.2% increase in August. With producers experiencing inflation, the markets will now be looking at today’s CPI to see if such inflationary pressures are reaching consumers. It is, however, important to note that these particular data releases are likely to be “skewed”, as the US economy is still being impacted by Hurricanes Harvey and Irma.

The US Labour market is showing more resilience as Thursday’s Initial Jobless Claims from the US Labour Department showed a better than expected decline of 15,000 to 243,000 for the week ended October 7th – better than many had forecast. With fewer Americans seeking unemployment benefits (i.e. more in full-time employment), many expect this fact to also put more inflationary pressure on the US economy and provide more confirmation to the Fed that they can raise rates.

  • EURUSD is holding steady in early trading, currently at 1.1850.
  • USDJPY is 0.2% lower overnight, currently trading around 112.05.
  • GBPUSD is little changed overnight. Currently, GBPUSD is trading around 1.3275.
  • Gold is trading 0.25% higher, currently trading at $1,296.
  • WTI benefitted from the recent EIA data gaining 0.25% overnight. Currently, WTI is trading around $51.20.

Major data releases for today:

At 15:30 BST, the US Census Bureau will release Retail Sales (MoM) for September. Consensus is calling for a strong release of 1.7% compared to the previous release of -0.2%. If the release is >1.7% the markets will expect to see USD buying, as it will add to confirmation for a rate hike by the Fed before Year End as consumers are spending more and therefore adding to upward inflationary pressure.

At 15:30 BST, the US Bureau of Labor Statistics will release Consumer Price Index (YoY) and (MoM) for September, along with CPI ex Food & Energy, Core and n.s.a. Annualized CPI is expected to come in at 2.3%, a healthy improvement from the previous release of 1.9%. Month-on-Month CPI is also expected to come in higher at 0.6% from the previous release of 0.4%. As an inflationary indicator, releases above the expected will see USD appreciate.


Source link  
Dollar is waiting for what Powell says

The U.S. dollar has returned to growth on the comments from the Fed officials about the need of further rates increases this year and next one. At the end...

Toxic lira can push euro to $1.04

The collapse of the Turkish lira spreads its toxic influence on the European and EM financial markets. Asian bourses have been losing more than 1% at Monday...

Dollar consolidates expecting rally

Financial markets rise on positive sentiments about earnings and China's fiscal stimulus. That pushed down the demand for USD, but more likely it is just...


USD defense will be short-lived

The dollar index reached the one-year highs on Wednesday due to the demand for safe assets. USDX reached level 95.43 on Thursday, breaking the peak levels...

FOMC expect to reach neutral policy

The FOMC minutes highlighted some increased risks to the US economy particularly concerning trade relationships but the view still holds that the Fed should...

US FOMC expected to raise rates again

UK Consumer Price Index (YoY) (May) is expected out at 2.5% against 2.4% previously. Producer Price Index – Input (YoY) (May) is expected...


PMI expected to weaken further

UK Construction PMI (May) will be out with an expected headline number of 49.7 from a prior number of 52.5. The consensus is for a drop in the numbers...

BOE Expected to Keep Rates at 0.5%

UK Industrial Production (YoY) (Mar) is expected to be 3.1% against a previous 2.2%. Industrial Production (MoM) (Feb) is expected to be 0.2% against...

Consumer Price Index Takes Centre Stage

UK Budget Report will be released. This is a mini-budget and outlines the government’s updated budget for the fiscal year, including infrastructure...

  


Share: