There is no credible offset to the Fed to support fading the USD – TDS

Inflation in the US rose to 6.8% on a yearly basis in November from 6.2% in October. That was in line with the median economist forecast. Given how the USD traded ahead of this data, a softer tone could emerge. This has its limitations, however, as this number will do nothing to derail a hawkish Fed, economists at TD Securities report.

Fed forced into action

“Another very strong CPI report, although largely as expected this time. The total rose 0.8% MoM (6.8% YoY), while core rose 0.5% (4.9% YoY). The data add to the case for Fed officials to turn more hawkish at the FOMC meeting next week.”

“Given how the USD had traded ahead of this report, the absence of a positive surprise should lend some modest relief for USD bears. That said, this number will not do anything to derail a hawkish Fed at its upcoming meeting.”

“We are biased to fade USD/CAD above 1.27, while EUR/USD should struggle to re-test 1.1350, while USD/JPY should reflect Fed pricing (which has eased a little).”