Flatline?
The latest US CPI inflation data was presented to markets yesterday. Based on the significant position and price adjustments we have seen following the US election earlier this month, October price data was seen as a critical statistic. Following an outperformance of the Republican Party at the polls and a 25-basis point cut from the Federal Reserve, this data point could have served as an afront or the missing link for the current trend in markets.
Ultimately, October CPI recorded in line with consensus forecasts for headline annual inflation. Published at 2.6%, this represents an as expected growth from September’s 2.4% reading. As we know, the Fed continues to take an almost exclusive fascination with services inflation. Stripping out more volatile elements of price change such as food and energy prices, markets also received an update on core CPI yesterday. Here, a green light to the dominant market trade could be found.
Core CPI came in hot for October, registering a 0.3% month-on-month gain. Higher inflation is consistent with one consequence of so-called Trump trades that have dominated market flow since the US election. Playing second fiddle to the headline index it is also noted that regional inflationary pressures are becoming increasingly divergent. In theory this could limit the Fed’s ability to act. However, in such a political environment as is expected come 2025, it could be unlikely to force an anchor upon the Fed.
Discussion and Analysis by Charles Porter
Weren’t Tariffs USD Negative? The Dollar proved sensitive to headlines regarding trade during the US overnight session. However, contrary to what many commentaries would have you believe, as the risk of tariffs escalated the Dollar rose. The 90-day pause following Trump’s April ‘liberation day’ tariffs had been set to expire this coming Wednesday. To the […]
Dollar Reserves With the passing of Trump’s original deadline for the reimposition of liberation day tariffs yesterday, markets have breathed a sigh of relief. July VIX futures continued to slide lower. Moreover, what may surprise anyone who had been expecting the issue of tariffs to resurface following the passing of Trump’s new deadline, so too […]
Big Girls Don’t Cry A bond market tantrum and one of the sharpest one day sell offs in Sterling for several years appear to have been catalysed by the Chancellor’s appearance in PMQs yesterday. First: the back story. This Labour government has faced some embarrassment in recent weeks trying to get its welfare bill through […]