US CPI Beats Expectations, Accelerating Dollar Buying
September US Consumer Price Index (CPI)
Headline YoY: +3.7% (vs. +3.6% expected)
Headline MoM: +0.6% (in line with expectations)
Core YoY: +2.6% (vs. +2.5% expected)
Core MoM: +0.3% (vs. +0.2% expected)
The core index (excluding food and energy) also came in above forecasts, reinforcing concerns that inflation may prove more persistent.
Main Drivers of the Rise
Gasoline prices jumped +9.1% MoM and accounted for roughly half of the overall CPI increase. Shelter costs and used car prices also rose.
Immediate Market Reaction
- USD/JPY: rose toward 158.80
- EUR/USD: fell toward 1.1137
- GBP/USD: fell toward 1.3214
- US 10-year yield: moved from around 5.18% to near 5.28%
- US equity index futures: turned lower
Focus Going Forward
The probability of a rate hike at the October FOMC has risen to roughly 44%.
The data supports further dollar strength via heightened caution over additional tightening. Attention now turns to whether US yields continue to rise and whether USD/JPY can sustain its advance.
