Stubbornly low inflation concerns the Fed

  • US CPI m/m: 0.1%
  • US Core CPI m/m: 0.1%
  • US Crude Oil Inventories: 2.6M
  • FOMC Meeting Minutes

US inflation dominated yesterday’s European session as the FOMC minutes were released later on in the evening. The US’ leading indicator of inflation; CPI posted a worse than expected 0.1% month-on-month, whilst core (excludes the volatile energy and food prices) CPI followed suit at 0.1%. The Dollar weakened slightly throughout the day against the Euro as a poor CPI figure was released and minutes from the Federal Reserve remained speculative. Oil has plummeted more than 30% this year amid rising global supply and demand. The energy slump will make the Fed’s 2% inflation target even more elusive.

Last night the Fed minutes were released as the markets awaited more insight into when rates will be raised.  However, leading up to the release of the minutes, the market concensus was 50/50 that a rate rise will be seen come the next meeting on the 17th September, after the minutes were published they showed that FOMC members said that economic conditions “were approaching that point”  where the economy could sustain a rate increase.  Although having stated this, the members gave no insight as to if this rate rise could come as early as the next meeting in September, instead the committee showed more concern over how inflation was remaining stubbornly low.  This preserved their flexibility of when a rate rise could be seen and saw the Dollar weaken as a result.

  • UK Retail Sales m/m
  • US Unemployment Claims
  • US Existing Home Sales
  • US Philly Fed Manufacturing Index
  • CNY Caixin Flash Manufacturing PMI

Early morning price action could be dependent on the content of the FOMC minutes. That aside there is still plenty to keep the market occupied in terms of data. UK retail sales are expected to reverse the -0.2% from last month. Crossing the pond there is a raft of data from the US including jobless claims, existing home sales and the Philly fed manufacturing index.