Fuel for the fire
An upside inflation miss in the United States has certainly not helped allay many developing nations’ concerns about a strong US Dollar. CPI inflation registered in the United States at 3.7% for the month of August. That compares with a 3.2% July figure which was clearly much closer to the Fed’s 2% target. The uptick in inflation has not had the markets flocking out of risk assets in droves as it might have theoretically done. Digestion of the rising headline inflation statistic was relatively calm as statisticians knew that due to the expiration of several base effect that were supporting a lower July figure, the August inflation read would be elevated.
Accordingly, the consensus for yesterday’s US CPI inflation read was for 3.6% year on year inflation. Core inflation remained more resilient at 4.3% in line with consensus forecasts and down from 4.7% in the prior month. As was expected, the rise in petroleum and gasoline prices observed at the pumps brought a wave of cost push inflation to the US consumer. A similar effect is expected to be observed within other nations’ inflation statistics, not least here in the UK. Inflation data is due to be read in the UK next Wednesday one day prior to the Bank of England decision.
So far, the above-target inflation read yesterday for the US has led the market to the conclusion that one final rate hike is plausible later on this year. Should the UK’s inflation read also be threatened by rising petrol prices then it is highly likely that the Bank of England could use this data to justify further hikes, at least in principle. To qualify yesterday’s US data, PPI and retail sales data will be observed this afternoon. This data will prove to be the filling in the ECB’s decision and subsequent press conference sandwich with volatility to be expected as we approach the afternoon trading session.
Discussion and Analysis by Charles Porter
Click Here to Subscribe to the SGM-FX Newsletter
Related Insights
Daily Brief – EU Inflation
Humphrey Percy
Wed 4 Jun 2025
EU Inflation Paving the way for a 25bp rate cut tomorrow, EU inflation came in at 1.9% on the back of uncertainty, lack of consumer confidence and people sitting on their cash. So overall good on inflation but a sign of less good things in the EU. As ever, the overall inflation figure had some […]
Daily Brief – British pound
Humphrey Percy
Fri 13 Jun 2025
British pound Sterling finds itself in the limelight and trading at its recent highs as somewhat improbably a couple of bolder market commentators have suggested the UK will benefit as a result of the disaffection with the USA and the USD at present. Those commentators have obviously not been following the commentary about UK Chancellor […]
Daily Brief – UK Employment
Humphrey Percy
Wed 11 Jun 2025
UK Employment Real life consequences of policies that fulfil Chancellor Reeves’ agenda: this time we will not dwell on the plainly evident politics of envy stuff about targeting the higher earners, stuffing the non-doms, and even deciding to double tax those wishing to pay for private education or invest in property through second homes. This […]
