US Core Inflation Stuck At 1.7% Again – USD Falls Across The Board

Disappointing US inflation figures: CPI and core CPI both miss expectations and monthly and yearly figures. Core CPI y/y failed to rise and remains stuck at 1.7%. Will the Fed reconsider the planned December hike? Retail sales data were not too bad, but not inspiring enough to mitigate the big thing: weak inflation.

We wrote that weak inflation could hit the dollar and indeed: the US dollar is falling across the board.

Here are the currency reactions, followed by the full data.

Currency reaction

  • EUR/USD traded around 1.1805 and is now surging to 1.1860.
  • GBP/USD was at support around 1.3265 and tops 1.33 once again
  • USD/JPY was at 112.25 and has fallen to 111.75
  • USD/CAD traded above 1.25 and is now down to 1.2470.
  • AUD/USD bounces from 0.7825 to 0.7870.

Here is the reaction on the euro/dollar chart. There is no doubt about the direction:

(Click on image to enlarge)

September retail sales and inflation

  • CPI m/m: previous 0.4%, exp. 0.4%, actual: 0.4%
  • Core CPI: prev. 0.2%, exp. +0.2%, actual: 0.1%
  • Core CPI y/y: prev. 1.7%, exp. 1.8%, actual: 1.7%
  • CPI y/y: prev. 1.9%, exp. 2.3%, actual: 2.2%
  • Retail sales m/m: prev. -0.2%, exp. 1.7% 1.6%
  • Core sales m/m: prev. 0.2%, exp. +0.3%, actual: 1%
  • Retail control group: prev. -0.2%, exp. +0.4%, 0.4%.

In addition, the data on real average earning has also dropped: 0.6% y/y against 1% last time.

Background

The US was expected to report a rise in core inflation from 1.7% to 1.8% in September, boosting the case for a rate hike by the Fed. Retail sales carried expectations for a rise of 1.7% m/m.

The US dollar was stable ahead of the big bulk of data.

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Comments

Moon Kil Woong 6 years ago Contributor's comment

The only way inflation picks up is commodity inflation for basic things which is not good, its bad. That is because the other ways inflation picks up are dead in the water. These are 1) People making more and spending more and/or more people making more which is not happening. 2) People borrowing more which is hard to do without #1 and isn't happening 3) The government spending more or taking less which is rumored but hasn't happened and 4) events that cause natural shortages and price run ups (fortunately none big enough to cause mass inflation across the board has happened) and 5) Some Federal Reserve insanity which I think the Federal Reserve is already up to its eyeballs with QE.