USD Begins the Comeback After Firmer September CPI Inflation
After nearly a week of retreating, the US dollar is starting to show signs that it wants to resume the bullish trend again. The Buck is now higher following the nflation figures released just a while ago. In housing inflation and energy contributed the majority of the price increases, which increased 3.7% year over year vs a tick down to 3.6% predicted.
Although core inflation remained unchanged, the overall report’s concerns caused the market tothis year’s high above 150. We are short on AUD/USD and long on USD/CAD and these trades are well in profit now as USD buyers start to come back form a week of pause. But let’s see if this will continue next week as well. Crude Oil is making lower highs, so it looks like WTI is heading lower after the bullish gap from last weekend.
US September 2023 Consumer Price Index Report
- CPI y/y 3.7% versus 3.6% expected
- Prior y/y 3.7%
- CPI m/m +0.4% versus +0.3% expected
- Prior m/m +0.6%
- 0.248513%
Core measures:
- Core CPI m/m +0.3% versus +0.3% expected. Last month 0.3%
- Unrounded core at +0.32% vs +0.278% prior
- Core CPI y/y 4.1% versus 4.1% expected. Last month was 4.3%
- Shelter +0.6% versus +0.3% last month. Year on year 7.2% versus 7.3% last month
- Services less rent and shelter +0.6% m/m vs +0.5% prior
- Real weekly earnings -0.2% vs -0.1% prior
- Food +0.2% m/m vs +0.2% m/m prior
- Energy +1.5% m/m vs +5.6% m/m prior
- Rents +0.5% vs +0.5% prior
- Owner equivalent rent +0.6% vs +0.4% prior
Fed pricing was at 10% for a November hike and 30% for December ahead of the data, with 77 bps in cuts priced in for 2024. US 10-year yields were trading down 4.7 bps to 4.55% ahead of the numbers and rose to 4.59% afterward.
Yesterday, after a scorching PPI report that immediately faded, there was a kneejerk reaction upward of 20 pip. That may indicate that the market no longer sees inflation as a threat.
Over half of the monthly rise in all categories was attributed to the shelter index, which was the biggest contribution.
Guy Lebas at Janney offers the following analysis:
Services excluding food, electricity, and housing (the “super core” of FED) +0.1% and running +1.1% Three months annualized is not at all alarming. The CPI for today won’t influence the decision to raise in November (it won’t happen). Watch out for the “inflation rising” narrative based on statistics from next month.
According to Capital Economics, the core CPI increased by just 0.1% MoM, excluding housing. Overall, we continue to anticipate a further decrease in inflation and slower economic growth, and nothing here will persuade Fed members to raise rates at the next FOMC meeting.
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