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All US inflation numbers beat:  headline CPI rises 0.2%  and core CPI rise 0.2%. Year over year, CPI is flat and core inflation rises to 1.7%, not too far from the Fed’s 2% target. While the Fed monitors Core PCE rather than Core CPI, these upbeat numbers on all fronts provide reasons for the dollar to rise. The downside in this report is that real weekly earnings are actually down 0.1% m/m.

The greenback is moving higher across the board.

EUR/USD is falling out of the tight range and trades below 1.0950. GBP/USD is testing 1.49, USD/JPY rises to 119.60, USD/CAD is trying to  recapture 1.25, AUD/USD is retreating from 0.79 and NZD/USD slips below 0.7650.

The US was expected to report a gain of 0.2% in prices month over month in February, a bounce back from the 0.7% fall in January. Year over year, a slide of 0.1% was on the cards, exactly like in the previous month. The soft headline numbers are clearly related to the plunge in oil prices. Core inflation carried expectations for a rise of 0.1%, slightly below 0.2% seen beforehand and y/y was expected to remain at a stable 1.6%.

The US dollar was still somewhat on the defensive towards the publication: EUR/USD was just under 1.10, GBP/USD at 1.4920, USD/JPY at 119.37, USD/CAD at 1.2480, AUD/USD  just under 0.79 and NZD/USD around 0.7650.

The Fed recently noted that it needs to be “confident” on inflation returning to the 2% target. The central bank focuses on Core PCE inflation. Core CPI is close  enough to give us the trend.

In our latest podcast we discuss  The Fed and the road ahead – all you need to know

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