US: CPI to rise 0.2% in June, unlikely to sway Fed views to the more hawkish side - TDS

Analysts at TDS, expect a reading for US June CPI of 0.2% m/m. They see risks as skewed to the downside following the PPI report.

Key Quotes: 

“We expect CPI to hit 2.9% y/y in June, with prices up 0.2% m/m, while core inflation should rise to 2.3% on a 0.2% m/m increase. Our views are in line with market expectations, and if anything we see risks as skewed to the downside following the PPI report. Weak producer-level food prices in particular over the prior three months suggest another subdued read for food CPI.”

“Firmer imported consumer goods prices and a rebound in shelter costs underpin a 0.2% m/m print in core CPI, a trend-line print that is unlikely to sway Fed views to the more hawkish side.”

“An on-consensus print should leave little to be desired from an FX point of view especially with the Fed still sitting on the narrative of tolerance of an inflation overshoot (for now) and summer doldrums in full force.”

“We will however, be on guard for signs of additional firmness in the underlying measure which, at the margin, will lend to (very) modest USD support though nothing to write home about we think. In the event this fails to materialize we think there is limited scope on USD downside as FX focus is distracted at the moment with trade top of mind following the latest trade salvo fired towards China. Overall, this leaves us on neutral footing for the USD.”