USD Nudges Higher after Latest CPI, Retail Sales, Attention Turns to FOMC

2017-03-15 13:30:00

Nick Cawley, Senior Strategist

Talking Points

- US inflation release meets expectations as investors now wait for the FOMC rate decision later in the day.

- February retail sales also as expected but January print revised higher.

- See the DailyFX Economic Calendar and see what live coverage for key event risk impacting FX markets is scheduled for next week on the DailyFX Webinar Calendar.

Key economic data for the US economy this morning is having little impact with the Federal Reserve rate decision around the corner. According to the Bureau of Labor Statistics, US inflation increased by +0.1% on a seasonally adjusted basis, the smallest one-month rise since July 2016. The report said that the decline in the gasoline index partially cancelled out rises in “several other indexes, including food, shelter and recreation.” On an annual basis, CPI rose by +2.7% from +2.5% in January, its highest level since early-2012.

Elsewhere, US retail sales for February gained by +0.1% against expectations of a 0.1% rise, but the January figure was revised higher to +0.6% from a prior +0.4% (all figures month-over-month). Notably, the Retail Sales Control Group, which is used in the GDP calculation, saw the January figure bumped higher to +0.8% from +0.4%, offsetting the slight miss in the February reading of +0.1% versus +0.2% expected.

All in the data did little to the US Dollar as investors wait for today’s main event, the FOMC policy announcement where, rates are expected to be hiked by 0.25%. With markets pricing in a 100% chance of a rate hike according to Fed fund futures contracts, all eyes will also be on the latest set of Fed projections (the Summary of Economic Projections (SEP)), in particular on inflation and the forward rate trajectory (known as the ‘glide path’).

Chart 1: EUR/USD 1-minute Timeframe (March 15, 2017 Intraday)