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US CPI & retail sales disappoint ahead of FOMC meeting

Posted on: June 14, 2017

Lots on the table for today in terms of economic data. US May CPI came in at 1.9% vs. expectations of 2.0%, and retail sales missed expectations in essentially every category, with the lone bright spot being Weekly/Hourly earnings. Business Inventories are due at 8:00MST, along with the FOMC rate decision at 12:00MST where we expect a 25bps hike to 1.25%. On Thursday, the major event is US unemployment claims.

This marks the third month in a row of weak inflation reports, not exactly what the Fed wanted to see the morning of their big decision. Technically speaking, USD/CAD next support is around 1.3160/70 and then again around 1.3120/30/ Resistance is seen around 1.3335 (the 200-day moving average). Given disappointing inflation data, the Fed is likely to be less confident that the weakness in inflation is only transitory; therefore we expect Yellen to mention risks pertaining to global growth in the press conference. USD could face fluctuations on two fronts. First, the Fed Projections will detail forecasts of inflation, unemployment, growth, and the dot plot. Secondly, markets will be looking for details on the Feds plan to lower the $4.2 trillion balance sheet in unwinding MBS and Treasury positions. Participants are still mixed about the Trump inflation trade regarding tax reform and increased capex on infrastructure, further adding to the dovish sentiment.

On the lookout this week, central banks in Japan, Switzerland and Britain are also scheduled to weigh in on their policy decisions this week. GBP appreciated earlier this morning on reports from a softer Brexit, only to retrace these gains on the news of UK wage growth data. On Friday, $1.3T of S&P500 options expire, this will likely provide additional market volatility starting Friday morning and into the next week.

  • Yesterdays NA Range 1.3212 – 1.3286
  • Asia Range 1.3213 – 1.3244
  • London Range 1.3166 – 1.3229


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