The US economic figures that were released yesterday managed to stop the US Dollar downward pressure, holding above the same key support which stands around 93.0.
PPI Data Suggests Higher Inflation
The Producer Prices came in slightly better than expected, the PPI MoM increased by 0.4% as widely expected, which is the biggest monthly increase since April and the second monthly increase in a row.
Moreover the Core PPI came in much better than expected, rising by 0.4%, which is the biggest monthly increase since May, despite the fact that the estimates were to rise by 0.1% only.
These figures suggests that the upcoming inflation data which will be released later today, might also come in with better than expected outcomes.
Inflation Estimates
There are four figures to watch today when it comes to inflation, the CPI on MoM and YoY in addition to the Core CPI on MoM and YoY as well.
The general consensus is positive. However, the YoY data is what we need to concentrate on today. The YoY CPI is expected to rise toward 2.3%, which would be the third increase in a row and the highest reading since March of this year and higher than the Fed’s 2% target.
At the same time the Core CPI YoY is expected to tick higher toward 1.8% up from 1.7%, which would be the first increase in four months.
If the inflation data comes as expected and/or better, this would increase the possibility for 25bps rate hike in December.
It’s Not Only Inflation
Despite the fact that the inflation data are the most important to watch today, yet, the Retail Sales data will be released today side by side with inflation.
Estimates are also encouraging , the Retail Sales is expected to rise by 1.7% in September after declining by -0.2% in August.
Moreover, the Core Retail Sales is also expected to rise by 0.3% after rising by 0.2% last month.
A better than expected figures would be a double positive catalyst for the US Dollar and would support the Federal Reserve assessment that the recent slowing down in inflation and some economic data is a short term play.
USDX Holding Support
The US Dollar Index declined since the beginning of the week all the way back to 93.0. support area, which remains solid until this report is released.
Moreover, the Index got some support from its trend line support on the daily chart, which should be watched carefully over the coming hours.
Those two trendlines stands between 92.80 and 92.50. As long as it continue to trade above those levels, the short term outlook remains bullish.
A positive outcomes from both inflation and retail sales, would be the perfect catalyst to keep the Index above those levels, with a possibility to retest 93.60’s.
Otherwise, a breakthrough those levels would clear the way for further declines ahead, especially if the data comes with a disappointment.
Edited by:
Nour Eldeen Al-Hammoury
Market Analyst
