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US CPI increased 0.2% m/m in February and US core inflation remains stable despite surging apparel costs; UK’s inflation seen falling to BoE target within a years’ time

Mar 14 • Morning Roll Call • 467 Views • No Comments

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in February on a seasonally adjusted basis after rising 0.5 percent in January,” the U.S. Bureau of Labor Statistics reported yesterday. Over the last 12 months, the all items index rose 2.2 percent before seasonal adjustment. The index for all items less food and energy increased 0.2 percent in February following a 0.3-percent increase in January, while all items index rose 2.2 percent for the 12 months ending February, a slightly larger increase than the 2.1-percent rise for the 12 months ending January and the index for all items less food and energy rose 1.8 percent over the past year, while the energy index increased 7.7 percent and the food index advanced 1.4 percent.

The US CPI data could mark the end of the prolonged period of sub-2% core CPI. With markets increasingly on the lookout for signs of positive US inflation surprises, yesterday’s consumer price data is unlikely to make too many waves. The key takeaway is that core inflation remained unchanged at 1.8% year-on-year, although there is still quite a lot of noise beneath the surface. For instance, apparel costs – a key factor behind last month’s positive inflation surprise – put in another massive monthly growth performance (1.5%), reversing the fairly noticeable decline we saw at the end of last year.

Pinning down the exact cause of this is fairly tricky, particularly at a time of intensifying competition within the clothing sector. For the most part, it is suspected this is largely noise. Rising housing/medical costs also look set to add upward momentum to overall inflation over coming months, whilst the weaker dollar looks set to provide a boost too – particularly as, in an environment of strong consumer demand, firms have the pricing power to pass higher costs onto shoppers. For this reason, four rate hikes are expected from the Fed this year.

With regards to the UK’s inflation, UK Chancellor, Philip Hammond, in his 2018 Spring Statement said that the inflation is seen falling to BoE target within a year and OBR sees continued job growth in the coming years. UK is expected ti meet structural deficit target in 2021 with £15 billion room, while deficit is seen to be £10 billion lower in 2018 compared with 2010.

On Thursday traders will be looking at the US import prices that are projected to gain 0.1% in February, while export prices rise 0.3%, down from 0.8% and the NAHB housing market index is also seen rising to 73 in March from 72. Data gears back up on Thursday with Empire State seen rising to 16.0 in March vs 13.1, while the Philly Fed index may slide to 21.0 in March from 25.8 and initial jobless claims may mean revert 8k lower to 223k for the March-10 week.

In addition, Canadian Q4 net worth will be closely watched on Thursday, as the report contains the debt-to-disposable income ratio. The ratio saw a record high 171.1% in Q3, and could move even higher in Q4 to underpin the elevated degree of sensitivity household have to higher interest rates. The report should underpin the BoC’s go-slow approach to policy normalization. February existing home sales are due Thursday. The ADP jobs tally for February is also due Thursday. -FXStreet
EUR/USD

The EUR/USD pair reached yesterday the 1.2400 area in the US afternoon, its highest since last Thursday, when a dovish Draghi sent it nose diving 200 pips, maintaining the positive tone according to the 4 hours chart, as the pair pressures its daily highs despite technical indicators lost upward momentum, anyway holding near overbought levels. Furthermore, and in the mentioned chart, the pair surpassed all of its moving averages with a long candle, which represents strong buying interest. -FXStreet

GBP/USD

The GBP/USD is maintaining an elevated position on the week despite risk aversion taking a beating on the US political woes, and the pair is pushing into the high side near 1.4000 in Asia. Technically, the pair is developing inside an ascendant channel, having pared gains near the roof of the figure, but holding nearby, which leans the scale toward the upside for the upcoming sessions. -FXStreet

USD/JPY

The Japanese Yen is pushing higher against the greenback, tracking a 0.35 percent decline in the S&P 500 futures. As of writing, the USD/JPY pair is trading at 106.42 – down 0.16 percent on the day. The fear that Trump’s broader tariffs on Chinese imports could lead to full-fledged trade war could be hurting the risky assets. -FXStreet

Gold

Having dropped to an intraday low level of $1313, gold caught some strong bids and surged to multi-day tops during the early NA session. -FXStreet

 

KEY ECONOMIC CALENDAR EVENTS FOR March 14th

AUD RBA Assist. Gov. Kent speaks
CNY Industrial Production (y/y)
CNY Fixed Asset Investment (ytd/y)
EUR German Final CPI (m/m)
EUR ECB President Draghi speaks
USD Core Retial Sales (m/m)
USD PPI (m/m)
USD Retail Sales (m/m)
USD Core PPI (m/m)
NZD GDP (q/q)

 

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