The US inflation numbers are finally out. This was an important report because it is the last one until the FED meets next month. There will be another inflation report released that day, just a few hours before the meeting, but the decision about the interest rate will be made by that time, making this the decisive report.

We have the retail sales along with the inflation report today. As the title of this update implies, the sales were on the softer side, although they remained in positive territory.

Retail sales posted a 0.4% increase as opposed to the 0.6% expected. Core retail sales, which strip out auto and gas sales, increased by 0.3% while expectations were 0.4%. These are positive numbers, albeit a tad softer than expected, but last month´s numbers were revised considerably higher too. This makes it a neutral sales report at worst, so the Buck must be diving on the inflation, right?

Well, let´s see. Both monthly CPI (consumer price index) and core CPI missed expectations by 1 point, but remained positive, while yearly core CPI dived back below 2%. This is the inflation number the FED refers to when it comes to monetary policy and 2% is the target.

We´ve only gone to 1.9% from 2.4% previously. As you can see on the core CPI chart below, the picture does not look very pretty, but I don´t think that there is something to worry about.

Back below 2% we go

If the trend continues like this and we dive to 1% or 1.5% and retail sales drop by more than 1%, then we would have cause to worry because it would put the FED off the rate hikes. But these numbers are still positive and core CPI is around the 2% target.

So, to me, this jump in USD pairs was just short term traders getting worried over nothing. That´s the reason we opened two sell forex signals, one in NZD/USD, which just hit TP and the other one in GBP/USD.