Mixed USD before CPI – Scotiabank

The US dollar (USD) is trading mixed ahead of the US CPI print, notes Shaun Osborne, chief FX strategist at Scotiabank.

USD mixed slightly firmer ahead of US CPI data

“The Street is looking for a 0.1% increase in headline CPI and a 0.2% increase in core CPI in September. The headline 12-month inflation rate is expected to ease to 2.3% from 2.5%, but core inflation over the year is expected to remain at 3.2%. Inflation trends are moderating but have yet to show the consistency of low earnings (0.1/0.2%) m/l that would make policy makers comfortable with the idea that inflation is more fully subdued.”

“Note that some models reflect a modest upside risk to core CPI estimates for September. With the balance of risks favoring further price moderation now, the Fed’s priority is shifting to – cautious – policy easing. But slightly firmer underlying prices may give Treasury yields and the USD an additional boost in the near term. Note swaps bid 20 bps to reduce risk ahead of November Fed meeting.