US: Headline CPI to hit new high in June, but core prices to decline – TD Securities

On Wednesday, June inflation data is due in the US. The CPI is expected to rise to a new post-COVID high. According to analysts from TD Securities, the annual inflation will show an increase from 8.6% to 8.9% while the core rate a decline to 5.7%. 

Key Quotes: 

“We look for core prices to have stayed strong on a m/m basis despite our expectation of modest slowing vs May. Indeed, we forecast a still-solid 0.5% m/m gain in the core series for June. In terms of the headline, we expect inflation (+1.2% m/m) to also be boosted by strong food prices and higher energy costs.”

“Our m/m projections imply that headline inflation likely gained speed on a y/y basis in June, despite likely softening in the core segment: We look for annual inflation to rise to 8.9% for the headline, but to decline to 5.7% for core prices.”

“Shock value into FX may be less acute given a much higher but almost evenly split forecast distribution for m/m core. Nonetheless, we think it remains premature to fade the USD if either scenario pans out. EURUSD rallies are a fade.”