Talking Points:
- The core Consumer Price Index (CPI) came in at 1.8%, higher than the estimates 1.9%; headline inflation also in line at 0.1%
- The US Dollar is unfazed at 93.53 as December rate hike odds don't budge at 100%.
- See the DailyFX Economic Calendar for upcoming economic data and for a schedule of live coverage see the DailyFX Webinar Calendar.
Consumer Price Index
According to the US Bureau of Labor Statistics, the Consumer Price Index (CPI) for all items less food and energy (core) rose +1.8%, more than the 1.7% estimate in October. Headline CPI came in as expected at +2%, which was slightly less than September’s +2.2% reading (y/y).
The Consumer Price Index CPI measures the change in prices paid by consumers for goods and services, in particular for urban consumers. Considering the urban consumer group (including suburban) represents about 89% of the total U.S. population they are a good proxy for US consumer prices. CPI is largely views as an ideal gauge for inflation. Nevertheless, the Fed's preferred gauges of inflation are the PCE and Core PCE.
Retail Sales and Earnings
Seasonally adjusted advance estimates of US. retail and for October saw an increase of +0.2% compared to the projected 0.0% flatline. Retail sales in September also saw an upward revision from +1.6% to +1.9% (m/m). Retail sales excluding automobiles missed the estimated +0.2%, coming in at +0.1% (m/m).
Real average hourly earnings rose by a meager +0.4% compared to +0.6% in October (y/y). Similarly, real average weekly earnings rose by +0.4% compared to +0.6% last month (y/y).
The Next Rate Hike
The CME Group’s FedWatch Tool largely ignored this mornings data as the chance of a rate hike in December continues to hold steady at or just below 100%. This model is subject to change given further economic developments, but for now, it seems a rate hike in December is locked in; it has been fully priced-in since October 26.
Source: CME Group FedWatch Tool
Below is a list of economic releases that has driven the US Dollar higher:
- USD Consumer Price Index (OCT): +2.0% as expected, from +2.2% (y/y)
- USD Consumer Price Index Ex Food & Energy (OCT): +1.8% versus +1.7% expected unch (y/y)
- USD Real Avg Weekly Earnings (OCT): +0.4% from +1.0% previous (y/y)
- USD Advance Retail Sales (OCT): +0.2% versus +0.1% expected, from -+1.9% (previous revised higher from +1.6%) (m/m)
See the DailyFX economic calendar for Wednesday, November 15, 2017
Chart 1: US Dollar Index 15-minute Chart (Wednesday, November 15, 2017 Intraday)
The chart above shows that the US Dollar Index fall about 23 pips following the release of the CPI and retail prints. At the time of that this article was written DXY retraced to the pre-data level of 93.53.
--- Written by Dylan Jusino, DailyFX Research and Christopher Vecchio, CFA, Senior Currency Strategist
