Summary:
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US CPI Y/Y: +2.2% vs +2.2% exp
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USD pulls back from near the 2018 high
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USDCAD remains close to potential resistance at 1.3445
The main economic data release of the afternoon has delivered little to go on with the latest inflation figures from the US matching expectations. The US CPI Y/Y for November increased by 2.2% as expected, marking a sizable drop on the 2.5% seen last time out. A core reading without food and energy also came in at 2.2% as expected, slightly higher than the 2.1% prior reading. Looking more closely at the data there was some mixed signals on wages with average weekly earnings rising by 0.5% Y/Y vs 0.8% previously, while average hourly earnings rose from 0.6% beforehand to 0.8%.
Even though the latest CPI core reading ticked higher this was largely expected and taken together with the PCE Core measure there seems to be little suggestion that inflation is in danger of moving much higher anytime soon. Source: XTB Macrobond
Today’s data will do little to apply pressure on the Fed to adopt a more hawkish path and their meeting next week will no doubt be closely scrutinised. Given the recent drop in the stock markets, ongoing trade tensions with China and comments from Governor Powell there is a growing feeling that the US central bank are not far from ending, or at least a pausing, their current hiking cycle. The US dollar has enjoyed a good year after a soft start and a trade weighted index of the buck is not far from a 19-month high.
The USD is back near prior resistance around 97.70 as the buck remains well supported. Recent lows of 96.35 could offer possible support. Source: xStation
Looking across the USD pairs USDCAD looks particularly interesting with the market recently reversing at 1.3445. The market has failed to move above this level despite a couple attempts and seeing that it is not far from where the price topped out back in the summer there’s some suggestion that the push higher is spent. A rising channel going back to the October low remains in tact with price also recently testing the upper bound. For a larger correction to occur this channel would need to be broken to the downside which is currently around 1.3250.
USDCAD is pulling back from recent resistance around 1.3445 and there is some suggestion that the push higher is fading out. A break below the lower bound of the rising trend channel (currently at 1.3250) is needed for a larger correction however. Source: xStation
