EUR/USD, USD/JPY, USD/CHF, EUR/CHF flows: Core CPI upside bolster Sep hike odds
Core CPI upside supports Sep FOMC tightening call, and mkt odds rise to around 85%
FX reaction modest thus far, though CHF remains on the back foot as the increasing low inflation, low rates stand out
US core CPI surprises to the upside of market at 0.3%m/m, as expected, though that does leave the yr/yr rate 2.4% in line with consensus In unrounded terms the core comes in at 0.29~ so it is a ‘genuine’ 0.3% print. Headline at 0.4% and 3.4%
Data is broadly supportive of the Sep FOMC hike call – data may not be dramatic, but it is firm enough to argue that some who may have been sitting on the fence may have seen enough persistence and stickiness to take the leap. PCE price data is still to come.
Reaction is fairly modest in FX thus far, though chances of a Sep hike have now risen back to the 85% area. It does, though, keep the CHF on the back foot after the ECB and now out of this data, as the CHF increasingly moves into top position as a low inflation, steady policy, last of the ‘zero rate policy’ carry-and short replacer, with the yen facing upward correction pressure.