US: Headline CPI inflation to moderate to 1.9% y/y in January - TDS

Analysts at TDS expect US headline CPI inflation to moderate to 1.9% y/y in January, with prices up a seasonally adjusted 0.3% m/m.

Key Quotes

“Energy prices should be a net positive, led by higher gasoline prices. We also see scope for a pickup in food prices, helped by dollar depreciation. Excluding food and energy, we expect core CPI to print a second consecutive 0.2% m/m increase.”

“There are two potential sources of upside risk that we do not expect to have much influence this month. One is the USD decline, which could lend a boost to weak goods categories like apparel. Yet the minimal pass-through into imported goods prices thus far suggests upward pressures on consumer prices remain limited. Another would be "residual seasonality," whereby monthly prints in the first half of the year have tended to be stronger than in the second half. However, some research finds that the upward bias in core CPI is not meaningful, and the month of January in particular does not show a convincing case for upside surprises.”


  • With market sentiment shaken following the recent equity rout, we think the CPI number will resonate prominently with G10FX. With the exception of cross/JPY, the reaction across the G10 space to the equity rout appears to have been more understated than usual. As such, we think this CPI release has the potential to compel more directional bets in the FX space as there is a palpable sense of heightened awareness around the outcome. At face value, an on consensus print may not impress FX markets initially, but the devil will be in the details (i.e. whether it's a "soft" or "firm" core CPI print).
  • Looking at the skew in the forecast distribution, there already is an upside bias on the headline print. Further, the arithmetic to push core inflation to 1.8% y/y will require a sizable m/m print while a "soft" core monthly print may be enough to pull the annual metric lower. Either scenario would reintroduce a discussion on future expected fed path beyond March. Taken in conjunction with equity markets still on shaky footing, and the already significant break through multi-year trend support in USDJPY, we continue to think that the path of least resistance remains lower for this currency pair.”


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