Is US inflation picking up?
From the original
There's NO sign underlying inflation is picking up despite yesterday's "hot" CPI
Related speeches
4 itemsFed still sidelined even as US inflation picks up in April - CIBC
The desk interprets the recent uptick in US inflation data as a signal that the Federal Reserve remains firmly on the sidelines, despite rising price pressures. Per the full note from CIBC, the April CPI rose to 3.8% year-on-year, slightly above the 3.7% consensus, driven by higher energy and shelter costs. This inflationary pressure is not expected to prompt an immediate Fed response, as market expectations currently align with no rate changes until year-end. The desk emphasizes that the Fed is likely to remain inactive until inflation trends closer to its 2% target or unemployment rises significantly, which aligns with CIBC's forecast.
Hot CPI print - Wall Street inflation fears mount as break-even rates hit multiyear highs
Lead — The desk is increasingly concerned about rising inflation expectations following a hotter-than-expected CPI print, which has driven five-year break-even rates to their highest levels since October 2022. Per the full note [source], the 10-year break-even rate also reached 2.5%, indicating a market expectation of average annual inflation around 2.7% over the next five years. This shift in inflation sentiment is likely to pressure the Federal Reserve towards rate hikes, which could negatively impact risk assets. With oil prices surging approximately 78% year-to-date, the implications for both equities and fixed income markets are significant.
FX Daily: Impact of US CPI mostly depends on equities
The desk anticipates a stronger-than-expected US CPI reading, forecasting a 0.9% month-on-month increase in the headline figure, which could reinforce the hawkish sentiment surrounding the USD curve. This expectation is underpinned by the belief that even a moderate core CPI rise of 0.3% month-on-month will not deter bullish dollar momentum, particularly as geopolitical tensions, such as stalled US-Iran negotiations, may weigh on equity markets. Per the full note [source], the interplay between these economic indicators and equity performance will be crucial for dollar strength moving forward.
FX Daily: US price check this week
The US inflation data release this week is expected to dictate near-term dollar direction, with market focus on whether disinflation progress continues or stalls. ING Economics highlights that a soft CPI print could weaken the dollar further, while a hot number may revive rate hike fears.