Date: 12 Jul 2018

Thursday’s US economic data highlight will be the release, at 1330h UK time, of US Consumer Price Index data. In light of last Friday’s benign US average hourly earnings data (2.7 per cent year-on-year (y/y) in June as opposed to the prior market expectation of a 2.8 per cent print) which weighed somewhat on the value of the US dollar, today’s CPI numbers arguably are of even greater consequence. What might traders expect? On a month-on-month (m/m) basis analysts at Japan’s Nomura Bank are looking for “a trend-like 0.202 per cent increase in core CPI inflation in June,” which would see on an annualized basis core CPI inflation inching up “to 2.272 per cent from 2.237 per cent previously.” As for headline CPI, the Japanese firm expects that to “increase to 0.212 per cent month-on-month” equating to “2.942 per cent year-on-year.” In a similar vein, analysts at Britain’s Barclays Bank are forecasting US core CPI to rise by 0.2 per cent m/m and 2.3 per cent y/y, with headline CPI up 0.2 per cent month-on-month and 2.9 per cent year-on-year. Hitting 2.9 per cent for headline CPI might underline to markets that the Fed still has justification to tighten policy twice more in 2018.” Whether such an outcome would be enough to give the US dollar a boost is for the currency market to decide but traders might find it easier to make an informed judgement with analysts’ CPI forecasts at their fingertips.