USD Continues the Retreat After Lower Headline US CPI

Yesterday the USD turned bearish after the softer PPI inflation, while the decline has accelerated today after the CPI inflation report. The report is even softer if you look at the details and the unrounded numbers, so markets are running away with the lower CPI numbers, which ticked lower from 3.0% to 2.9%.

Before the CPI release, the market had priced in 106 basis points of Fed rate cuts, but this has now adjusted to 103 basis points. This suggests that the market had anticipated a greater downside surprise, leading to a slightly hawkish reaction. However, the unrounded data offers a clearer picture than the headline figures, and there is some expected relief in the housing sector. Following yesterday’s PPI data, there was some early USD selling, which gained momentum after today’s lower-than-expected CPI headline figure, with the Euro particularly benefiting from this shift.

US July 2024 Consumer Price Index

• US July CPI: +2.9% y/y (vs +3.0% expected), prior was +3.0% y/y.
• Month-over-Month (m/m): +0.2% (in line with expectations), unrounded +0.1549%.

• Core Measures:
  • Core CPI: +3.2% y/y (as expected).
  • Core CPI m/m: +0.2% (as expected), unrounded +0.166%.
  • Real weekly earnings: -0.2% (vs +0.3% prior).
  • Supercore m/m: +0.205% (vs +0.054% prior).
  • Supercore y/y: +4.468% (vs +4.651% prior).
• Key Details:
  • Shelter index rose 0.4%, accounting for nearly 90% of the monthly increase.
  • Shelter m/m: +0.4% (vs +0.2% prior).
  • Rent: +0.5% (vs +0.3% prior).
  • Owners’ equivalent rent: +0.4% (vs +0.3% prior).
  • Lodging away from home: +0.2% (vs -2.0% prior).
  • Energy index unchanged after two months of declines.
  • Food index up 0.2%, matching June’s increase.
  • Used cars and trucks index fell 2.3%.
  • Airline fares down 1.6% (vs -5.0% prior).
  • Motor vehicle insurance: +1.2% (vs +0.9% m/m prior).

ABOUT THE AUTHOR See More

Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.

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