US inflation data released yesterday left the door open for another interest-rate hike this year, even as policymakers showed themselves to be cautious ahead of the next meeting. Core CPI, the best measure for underlying inflation, increased 0.3% MoM but in line with estimates. Headline CPI crept up to 0.4%, above expectations, due to an increase in energy costs.
- The US dollar continues to reign, and it is set to post a 4-week gain as CPI data boosted yields higher on sentiment that the Fed may keep interest rates higher for longer.
In Europe, Swedish, French and Spain CPI are due along with Eurozone Industrial production, and the euro trades mid 1.05-1.06 against the US dollar.
- EUR/USD continues to trade in a bearish trend, and we tried to break the upper part of the downward channel yesterday afternoon, but the market clearly showed its positioning after US CPI, and the euro was sold. We are currently trading lower at 1.0539.
GBP/USD also dropped on US CPI news, dropping from 1.2320 to 1.2174. The market is in syntony, and it feels like it will look out for reasons to short the sterling.
CPI in China is back to zero, indicating demand remains too weak to move prices. The gauge was unchanged at 0.1%, following August’s print while the estimates were 0.2%. USD/CNH trades at 7.3068 after advancing 0.1% last night, and USD/CNY muted at 7.3058.
Oil is set to finish the week with a modest gain as fears of the Israel-Hamas conflict disrupting the Middle East and compressing global oil supply build up.