Harvey impacts inflation USDJPY remains volatile

USDJPY, H4

The 0.4% August U.S. CPI headline rise with a 0.2% core price gain both beat estimates thanks to Harvey, with an expected 2.8% energy price rise and a 0.1% food price uptick, but with a core price lift from gains of 4.4% for lodging away from home and 5.1% for hotel costs. We saw a third consecutive 0.3% gain for owners’ equivalent rent, a 0.2% rise for medical care services, and a flat new vehicle price figure after six consecutive drops. The headline figures rounded down from solid gains of 0.402% for CPI and 0.248% for the core. We expect a 0.5% September headline CPI rise with a 0.2% core increase, with lifts from Harvey and Irma that should translate to a 14% September gasoline price rise. The headline y/y increase should rise to 2.2% from 1.9% in August and 1.7% in July, while the “core” y/y rise climbs to 1.8% from a fourth consecutive 1.7% reading in August. We expect a 0.4% headline PCE chain price rise with a 0.2% core price gain that match today’s CPI figures, which would leave the y/y chain price rise climbing to 1.6% from 1.4% in June and July. We expect a 0.3% August nominal consumption rise with a 0.1% “real” drop.

USDJPY dropped on report of North Korean antics, with the Nikkei newspaper citing a Japanese government source saying that Pyongyang is preparing to conduct another missile test. USDJPY was kicked lower from around 111.00, after popping higher following strong U.S. data leads. The pair has settled around 110.50-60. A North Korean state agency earlier threatened to “sink” Japan and reduce the U.S. to “ashes and darkness