- US headline and core CPI miss expectations
- Market odds of another Fed rate hike fall to near zero
- EUR/USD breaks through channel high after report
We’ve seen quite a response to the US inflation report on Tuesday, with investors clearly buoyed by the miss on both the headline and core numbers.
While in both cases we’re talking about modest misses, it does feel nonetheless significant. The annual core rate fell to 4% which is still far too high but the monthly reading fell back to 0.2%, preventing an anticipated third month of 0.3% and the possible development of a stubborn trend, which is still broadly on the way down.
It may sound marginal but paired with a miss on the headline to 3.2 on an annual basis and flat on a monthly and this looks like a really promising report.
Of course, there’s another to come a day before the December meeting but today potentially lays the groundwork for the Fed to adopt a much less hawkish position – especially compared with September – and markets are now seemingly convinced the tightening cycle is over.