Inflation Meets Expectations; Could Weigh on Greenback

The U.S. dollar slipped modestly throughout yesterday’s session and was unable to recoup those losses in overnight trading.


This morning’s Consumer Price Index is the headline risk event on today’s docket and will likely dictate the direction of the greenback. However, volatility lovers may be disappointed as the print met expectations down the line and has had little impact on the greenback in early trading.

U.S. consumer prices firmed in February and showed inflation continues to hang near the Federal Reserve’s target. Both the headline and so-called “core” gauge rose 0.2% from January. Headline inflation was up 0.5% in the month prior. Overall, CPI was up at 2.2% over the past twelve months, slightly higher than the 2.1% in the month prior.

While the print met economist’s expectations, it could end up hurting the greenback. Some had expected what Bloomberg News is calling a “breakout” that would warrant a faster pace of interest rate hikes. That clearly did not happen today. Indeed, interest rate futures are largely unchanged in the moments following the data. Markets are pricing a 100% chance that Fed will raise rates when they meet next week.



After gaining yesterday, the Japanese yen reversed overnight. The yen had gained as Japanese stocks fell on news that Finance Minister Aso was embroiled in a land deal scandal. However, Japanese stocks rallied overnight, easing the risk aversion play for the yen. Global equities are also higher this morning, putting additional downward pressure on the safe-haven.

The yen is near a two-week low versus the U.S. dollar. The latest Bank of Japan meeting minutes will be released tonight but are unlikely to have a significant impact on USD/JPY.



The British pound was slightly lower overnight, falling for the first time in three days. At the time of writing, U.K. Chancellor Phillip Hammond is giving his “Spring Statement.” Hammond is expected to give a rosy assessment of the U.K.’s fiscal deficit and public debt, which may help the sterling recover. It is a light news week on the fundamental front in the U.K.. However, markets will be keeping an eye on news on what steps the U.K. government may take against Russia following reports of a nerve agent attack in Salisbury last week.