A big bulk of US releases showed an “as expected” result in the most important figure, but a mixed outcome for the rest. Core inflation is up to 2.1% y/y, as expected, but month over month, it is only +0.1%. Headline CPI actually dropped 0.1% m/m and rose only 0.7% y/y. Building permits beat expectations with 1.232 million annualized but housing starts missed with 1.149 million. Both figures carried the same expectations of 1.2 million.
All, a mixed result leaving markets a bit confused.
Core inflation in the US was expected to rise to 2.1% y/y in December from 2% in November. Headline inflation carried expectations of 0.8% from 0.5%. Month over month, core was predicted to rise 0.2% and the headline to remain flat. Housing data was also published.
This publication is more important than beforehand due to the emphasis that the Fed put on inflation data in the recent rate decision.
The risk off atmosphere prevailed before the release, but there was a small correction, meaning a weaker euro and a weaker yen and some relief for the pound and commodity currencies.
More: EUR: Trading The ECB: ‘Pride & Prejudice’ – BofA Merrill
One currency that has a clearer direction is the Canadian dollar: Canadian manufacturing sales came out at 1%, better than expected, and wholesale sales also beat with 1.8%. Together with a better mood in markets, USD/CAD is down to 1.4625. This isn’t really low for the pair, but a difference from the highs near 1.47 seen earlier and ahead of the Canadian rate decision at 15:00 GMT.
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