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Another day, another data point. Yesterday, this column highlighted that the dollar, driven by weak retail-sales numbers, had hit its lowest value against the euro since Aug. 25. Today, foreign-exchange traders were focused on another data release: the consumer price index (CPI) for the month of September.
That data was enough to reverse the dollar's recent trend against the euro and end a six-day losing streak (the worst in a month).
Despite the fact that this morning's report from the Bureau of Labor Statistics showed a decline in the CPI of 0.2% in September relative to the previous month, "core" inflation (which excludes food and energy prices, which are volatile) rose by 0.2%.
Not quite galloping inflation to be sure, but crucially, that number was slightly ahead of the consensus estimate, which called for a barely perceptible 0.1% increase.
Furthermore, it was enough to raise the year-on-year increase in the core CPI to 1.9% from 1.8% in August. That's just below the Federal Reserve's medium-term inflation target of 2% (although Fed policymakers look at a different measure of inflation, the personal consumption expenditures price index, or PCE).
Observable inflation in the U.S. draws a sharp contrast with the situation in the eurozone: According to a Bloomberg poll of economists, the region experienced falling prices last month for the first time since the European Central Bank embarked on its quantitative easing program. The eurozone reports its inflation data tomorrow.
|
Value/ |
Dollar Strengthening/ Weakening | |
|---|---|---|
|
EUR-USD (CURRENCY: EURUSD) |
$1.1380 (0.82%) |
Strengthening |
|
USD-CAD (CURRENCY: CADUSD) |
C$1.2848 (0.68%) |
Weakening |
|
GBP-USD (CURRENCY: GBPUSD) |
$1.5485 +0.05% |
Weakening |
Source: Bloomberg as of 3:18 p.m. EDT on Oct. 15, 2015. CAD = Canadian dollar. GBP = British pound.
The contrast may well explain the dollar's rise against the euro today; the dollar fell against the Canadian dollar and the British pound.
The dollar also found a defender in New York Federal Reserve president William Dudley, who said today that a rate rise in 2015 remains likely and downplayed any disagreement within the Federal Open Market Committee. There is still major uncertainty regarding the timing of the first rate hike. 2015 remains in play -- place your bets!
