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US inflation is still very present. CPI has risen by 0.5% in July, significantly above expectations for a rise of 0.2%. Also core inflation, which the Fed closely watches is still rising (+0.2%) and showing no signs of deflation. The chance of an announcement about QE3 in Jackson Hole is low.

On the flip side of US data, weekly jobless claims jumped back above the 400K mark and stood on 408K. Also last month’s reported drop to 395K was revised and now stands on 399K. Currencies hardly move on this mixed data.

Yesterday, producer prices have also risen significantly. The main reasoning for QE2 was to prevent a case of deflation: falling prices lower the motivation to consumer – a downwards spiral. This goal was certainly achieved. Helping unemployment and growth wasn’t achieved.

Prices could still fall in August. The turmoil in the markets also hit commodity prices, including oil, but the overall picture remains or prices still moving up. QE3 can push them too high. High oil prices erode Americans’ spare income and hurt the economy.

It will be quite surprising if the Fed would try once again to fight unemployment with the same means of quantitative easing.

EUR/USD is very slightly higher after the data was released, while the dollar is slightly stronger against the yen.

Later, two more important US economic figures are released: the Philly Fed Manufacturing Index and  Existing Home Sales.

In the euro-zone, inflation is definitely slowing down and may justify a rate cut. Core inflation in the euro zone fell to an annual pace of 1.2%. The interest rate there is 1.50%, while in the US, rates are close to 0%.

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