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:
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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