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US CPI is down 0.3% m/m with +1.3% y/y. Core CPI rose by 0.1% as expected but the annualized number slipped to 1.7%. The fall in headline CPI is not a huge surprise given the fall in oil prices. Nevertheless, it is the biggest fall since December 2008. Will the Fed see through it and deem the slight slip in Core CPI as minor?

The slightly lower than expected number sends the dollar slightly lower across the board. This includes majors, minors, safe haven and commodity currencies.

The US was expected to report a fall of 0.1% in prices m/m and an annual pace of 1.4% y/y after 1.7% in October. Core CPI was expected to rise 0.1% m/m and remain at 1.8% y/y.

The dollar was relatively steady  towards the publication, with EUR/USD trading around 1.2450, GBP/USD just under 1.57 and USD/JPY around 117.15. USD/CAD was around 1.1630 and AUD/USD under 0.82.

In addition  the US was forecast  to report a current account deficit of around 100 billion dollars in Q3 2014. The actual result is -100.26 billion –  within expectations.

The  inflation data is an important input for the Federal Reserve towards its meeting. Lower inflation can trigger a dovish decision, while the recent upbeat job figures could  trigger a hawkish decision.

The big event of the day is the Fed decision in the US. See the preview:  FOMC quick preview: what’s more important: employment or inflation? Currencies to trade in both cases