THE TAKEAWAY: USD Consumer Price Index (NOV) > -0.3% versus -0.2% expected, from +0.1% (m/m); +1.8% versus +1.9% expected, from +2.2% (y/y) > USD Consumer Price Index ex Food & Energy (NOV) > +0.1% versus +0.2% expected, from +0.2% (m/m) > +1.9% versus +2.0% expected, from +2.0% (y/y) > USDJPY BEARISH
Federal Reserve policymakers were vindicated today as the November Consumer Price Index report showed that both inflation and disinflation are starting to come back to the US economy. For the most part, the divergence between the headline reading and the core reading suggests that falling energy prices may be the culprit for the decline; indeed, the Energy subcomponent dropped by -4.1% m/m. On a monthly-basis, headline inflation contracted by -0.3%, signaling deflation, while the core reading came in at +0.1% m/m. On a yearly-basis, the headline figure rose by +1.8%, while the core reading was a shade weaker at +1.9% y/y.
It is worth noting that these figures come at a time following Hurricane Sandy, which put economic activity in the Northeastern US on hold for more than a week (Transportation costs fell by -2.6% m/m in November), which hurts consumption and demand-driven inflation; and the beginning of the holiday sales period at the end of the month saw retailers slash prices across the board – these lower prices are also reflected in the figure (the Apparel subcomponent fell by -0.6% m/m).
USD/JPY 1-minute Chart: December 14, 2012
Charts Created using Marketscope – Prepared by Christopher Vecchio
Following the data, yields supporting the US Dollar fell, with the USDPY dropping from 83.70 just ahead of the release to as low as 83.46 in the minutes after. However, at the time this report was written, the pair had rebounded back to 83.58.
--- Written by Christopher Vecchio, Currency Analyst
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