Talking Points:

- The Consumer Price Index (CPI) came in at 2.2%, slightly lower than the estimates at 2.3%; core inflation also missed expectations at 1.7% versus the expected 1.8%.

- Third rate hike for 2017 still well in play at 83%

- The US Dollar falls below 92.95 support level following CPI print

- See the DailyFX Economic Calendar for upcoming economic data and for a schedule of live coverage see the DailyFX Webinar Calendar.

Consumer Price Index

Markets did not buy the inflation and retail data coming out of the US this morning. The headline CPI YoY figure for September came in at 2.0% slightly missing the estimated at 2.3%. The core figure was also a slight miss at 1.7% versus the estimated 1.8%. Despite CPI coming in above the Federal Reserve’s 2.0% target it was primarily driven by a rise in energy costs. Energy came in at 6.1% in September versus 2.8% in August. Food costs were flat in September over the previous month and apparel contracted at -0.1%. Transportation costs rose by 2.8% versus 1.4% in September.

Retail and Earnings

Retail Sales similarly missed estimates coming in at 1.6% versus the 1.7% estimated. Weekly earnings rose by 0.6% versus 1.0% (revised higher from 0.9%) in August.

The Next Rate Hike

CME Group’s FedWatch Tool laregly ignored this mornings data as the chance of a rate hike in December holds steady at around 83% This model is subject to change given further economic developments. The Fed’s 2% inflation target is a strong determinant of a rate hike.

US Dollar Pressured After Energy-Driven CPI Print Disappoints

Source: CME Group FedWatch Tool

Below is a list of economic releases that has driven the US Dollar higher:

- USD Consumer Price Index (YoY) (SEP): +2.2% versus +2.3% expected, from +1.9%

- USD Consumer Price Index Ex Food & Energy (YoY) (SEP): +1.7% versus +1.8% expected, from +1.7% previous

- USD Real Avg Weekly Earnings (YoY) (SEP): +0.6% versus +1.0% previous

- USD Advance Retail Sales (SEP): +1.6% versus 1.7% expected, from -0.1% previous

See the DailyFX economic calendar for Friday, October 13, 2017

Chart 1: US Dollar Index 15-minute Chart (Friday 13, 2017 Intraday)

US Dollar Pressured After Energy-Driven CPI Print Disappoints

The chart above shows that the US Dollar Index fall sharply through the intraday 92.95 support level following the realease of the CPI data. At the time that this was written the rebounded slightly although remains below 92.95.

--- Written by Dylan Jusino, DailyFX Research