The US CPI report undershot estimates in August, with gains of 0.3% for the headline and 0.1% for the core, leaving more moderate gains over the last two months after four months of outsized gains, suggesting we may be turning the corner on supply chain disruptions. The August gains rounded from respective increases of 0.274% and 0.102%. The big updraft in vehicle prices and airfares plateaued in July and reversed course in August, after a massive three-month climb that fueled big headline gains. We’re seeing persistent gains in most of the remaining components, so there is still substantial price pressure. On a moving average basis, CPI headline gains are still trending higher. We have 6-month average price gains of 0.615% for the headline and 0.550% for the core, versus respective 12-month average gains of 0.424% and 0.326%. For the August PCE chain price indexes, we assume gains of 0.2% for the headline and 0.1% for the core. This would leave the y/y headline metric slipping to 4.1% from 4.2% in July, while the y/y PCE core metric falls to 3.4% from 3.6%.

US headline CPI underpinned the Fed’s expectation of “transient” as reopening pressures eased off.

The US Dollar fell following the cooler than expected CPI outcome. USDJPY dropped from intra day highs of 110.15 to 109.87, while EURUSD rallied to 1.1846 from near 1.1805. USDCAD dropped to 1.2600 lows from 1.2655 following the mix of data, which helped to take USOIL to over 1-month highs, a CAD plus. The in-line Canada July manufacturing shipments print, which included a sharply upwardly revised June outcome, helped the loonie as well. Friday’s 1.2583 low marks the next downside Support for USDCAD, while a break below it could open the doors to 1.2500 and 1.2420 levels.

Chart

USOIL prices also remain underpinned and trading around the $71 per barrel, after another storm threatens the US energy hub in the Gulf of Mexico. ‘Nicholas’ made landfall in Texas after being upgraded to a hurricane and will add to existing problems for coastal refineries and petrochemical facilities. The IEA highlighted that global oil supplies fell by 540k barrels a day in August thanks to unexpected disruptions and thus wiped out extra supply from OPEC+. Overall outlook for the USOIL remains positive with next Resistance levels at $72.24 (upper Daily BB line), and $74.00-$74.55 (June 21st peak and 88.6% Fib. level.) Support held at 61.8% Fib level, at $70.55.

Nevertheless, equity futures headed higher after the data, with the major index contracts indicating about a 0.3% higher Wall Street open. Treasury yields are a bit lower, with the front-end and belly of the curve outperforming.

Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

Feed news

How do emotions affect trade?
Follow up our daily analysts guidance

Subscribe Today!    

Latest Forex Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD drifts down toward 1.17 as mood worsens

EUR/USD is trading closer to 1.17, off the highs. Concerns about Chinese giant Evergrande's troubles return to weigh on sentiment, supporting the safe-haven dollar ahead of the PBOC and Fed meetings on Wednesday. 

EUR/USD News

GBP/USD falls toward 1.3650 on fresh dollar strength

GBP/USD is retreating back toward 1.3650 as the dollar reasserts itself. Fears that the crisis in China's Evergrande could turn into a more significant downturn have resumed. Central bank decisions are awaited.

GBP/USD News

Gold: Further advances depend on the Fed

A better market mood put pressure on the American currency. The US Federal Reserve will announce its monetary policy decision on Wednesday. Gold advanced for a second day in a row, but additional gains are in doubt.

Gold News

Alts rebound while Bitcoin tends to its wounds

Bitcoin price suffered a brutal setback as it dropped from being extremely close to a crucial psychological level to slicing through a stable support floor.

Read more

PBoC September Preview: Will policymakers step in to ease Evergrande fears?

People’s Bank of China (PBoC) will announce monetary policy decisions on September 22. Financial markets remain restless amid ongoing Evergrande crisis. PBoC could lower RRR further to support economy. 

Read more

Majors

Cryptocurrencies

Signatures