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Prices are rising stronger than expected in the US: headlines CPI is at 2.1% with +0.4% m/m, while Core CPI rises to 2% after +0.3% m/m. The positive inflation figures overshadow weak housing data.

Analysis:  Will Yellen take a page from Carney’s book?

US  annual inflation was expected to stand at 2% y/y rising 0.2% in May. Core inflation was predicted to rise by the same 0.2% m/m and advance to 1.9% y/y. Building permits  carried expectations to slide to an annual level of 1.055 million from 1.08  million in April, but they disappointed with 0.991 million. Housing starts to follow a similar path and drop from 1.072 to 1.05 million but they came out short at 1.001  million.

Before the release, EUR/USD traded steadily around 1.0350, USD/JPY battled with 102 and GBP/USD recovered back up to 1.6975. The dollar is now stronger with EUR/USD sliding towards support at 1.3550, USD/JPY climbing above 102 and the pound sliding back down.

Markets already  have one eye on tomorrow’s big event: the Fed decision. While there is no doubt that the Fed will taper again to $35 billion / month for the fifth time, there is uncertainty about the guidance and the forecasts. Will the Fed indicate the potential timing of a rate hike?

With these inflation figures, Yellen could take a page from Carney’s book.

More:  Fed unlikely to rock the boat, Carney could have preempted meeting minutes