Global inflation watch: Tariff pass-through still in progress

Danske Research Team Danske Bank A/S

Overview: Inflation picked up speed in August across major economies, though still very moderately. Inflation expectations continue to diverge between the US and the rest of the world. In the US, tariff costs are slowly making their way through the economy, but impact on final consumer prices has so far been limited. In the euro area, both realized and expected inflation hover pleasantly close to the 2% target. Oil prices remain relatively stable despite the uncertain geopolitical landscape.

Inflation expectations: Both survey and market-based inflation expectations measures have remained relatively stable over the past month. Short-term US expectations remain elevated due to the tariffs, but longer-term expectations are well anchored on both sides of the Atlantic.

US: August CPI came out just slightly above expectations, headline inflation was +0.38% m/m SA (2.9% y/y, cons. +0.3%, July +0.2%) and core inflation +0.35% m/m SA (3.1% y/y, cons. +0.3%, July +0.3%). The slight acceleration was driven by food and housing services, while price pressures for other services moderated. Importantly, tariff-driven inflation in core goods was still rather limited. The PPI illustrated how retailers and wholesalers first increased their sales margins in July ahead of the tariff announcements and then absorbed most of the increased costs in August. We still expect the Fed to resume quarterly 25bp cuts in September.

Download the Full Report!

Author

Danske Research Team

Danske Bank A/S

Research is part of Danske Bank Markets and operate as Danske Bank's research department. The department monitors financial markets and economic trends of relevance to Danske Bank Markets and its clients.

GBP/USD loses momentum, flirts with 1.3200

GBP/USD is struggling to maintain its positive bias on Thursday, retreating toward the 1.3200 region in response to the pick in the buying interest around the Greenback. That said, Cable remains under scrutiny as cautious market sentiment keeps investors focused on the US-Iran conflict and political effervescence in the UK.

EUR/USD trims gains, challenges 1.1400

EUR/USD now gives away part of its earlier advance, receding toward the 1.1400 contention zone on Thursday. Meanwhile, the pair’s recovery comes amid extra losses in the US Dollar, at the time when while investors continue to monitor developments in the Middle East and sentiment surrounding global technology stocks.

Gold remains bid and close to $4,100

Gold accelerates its recovery and approaches the key $4,000 mark per troy ounce at the end of the week, adding to Thursday’s advance. However, expectations for a hawkish Fed remain steady and keep the yellow metal’s potential upside contained.

Crypto Today: Bitcoin at $60,000, Ethereum at $1,500, and XRP at $1 face a make-or-break test

Bitcoin (BTC), Ethereum (ETH), and Ripple (XRP) are trading in the red on Friday after three consecutive days of losses, testing their respective make-or-break support levels.

Week ahead – NFP report to challenge Dollar strength and the hawkish Fed

Dollar strength dominates markets, as the hawkish Fed overshadows geopolitics and lower oil prices. NFP week could drive September Fed hike expectations and boost market volatility. The euro lacks fresh bullish catalysts, all eyes on the preliminary inflation report and the ECB Forum.

Regime change: Inside Kevin Warsh's first move to make the Fed unreadable on purpose

The rate did not move. That was the least interesting thing about Kevin Warsh's first meeting in charge of the Fed. The FOMC held its benchmark at 3.50%-3.75% for the fourth straight meeting, exactly as priced, and then the new chair used his first press conference to dismantle the machinery the market has leaned on for a decade.