US core inflation ticks up to 1.8% – USD is on fire

Headline inflation is down to -0.1% – deflation territory, but it has been there before, due to oil prices. Core inflation, which the Fed eyes more closely, is up to 1.8% y/y, better than expected. Month over month, both rose 0.2% as expected.

The dollar remains unimpressed: it is rising only a bit in the immediate reaction.

Update: it is looking better for the USD: EUR/USD trades around 1.0780, GBP/USD is hardly clinging to 1.50, USD/JPY is tackling 119, AUD/USD slips below 0.78 and NZD/USD below 0.77. Only  the C$ rises against the dollar on a bulk of all-positive Canadian data.

Another update: the move accelerates with EUR/USD falling towards 1.0750 and GBP/USD losing 1.50.

The US was expected to report a y/y inflation level of 0% – no change in prices, for the month of March. This was also the number in February, before revisions. Core CPI, which is eyed by the Fed, carried expectations for a rise of 1.7%, also identical to the previous month. On a monthly level, both numbers were predicted to rise 0.2% in March.

The US dollar was clearly on the back foot, reacting to a long losing streak of disappointments.

EUR/USD traded above 1.08, GBP/USD above 1.5020, USD/JPY around 118.75, USD/CAD just under 1.22, AUD/USD at 0.78 and NZD/USD over 0.77.

The shortcoming ranged from retail sales, industrial output, jobless claims and housing figures. Only the Philly Fed figure for April came out better than expected, providing minimal hope for a recovery in Q2.

There is one more  important data point left this week: the University of Michigan / Reuters consumer sentiment survey.

See how to trade the consumer sentiment number with EUR/USD

In our latest podcast, we talk about  The Confetti Lady that moved Draghi but not Markets

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