US Inflation Slips - Core Rate Down 0.2% To 2.2%
The USD takes a hit on softer inflation reading in the US - the headline year on year rate as of Aug coming in at 2.7% - 0.1% lower than expected. More significantly, the yearly core rate is down by 0.2% and has come in at 2.2% vs 2.4% expected. This may start to take some of the pressure off pricing for a Dec hike, though naturally, this will have to be measured in line with the rest of the data metrics.
Employment remains strong, and this has again been reinforced by the latest weekly claims data which has come in at 204k this week, a touch under last week and lower than expected.
Despite this, positioning remains key. As the market is significantly long USDs, there will be an element of trimming, yet with yields still favouring the greenback, we cannot see a wholesale turnaround just yet.
As we can see with USD/JPY, the pair remains buoyant with a view to retesting the upper 111.00's, though we are consistently running against heavy offers here.
EUR/USD is now through 1.1650, with the ECB press conference currently in process, and president Draghi not as dovish as some were perhaps expecting. There is much stronger resistance to negotiate in the 1.1750 area, and so far, this looks out of reach.