The spike higher in US inflation as the economy recovers is showing no sign of slowing.
US inflation has once more come in ahead of expectation. Both core and headline CPI are accelerating higher, with both inflation measures on a monthly and yearly basis outstripping forecasts. This data is helping to pull bond yields back higher after downside pressure in recent sessions.
However rising yields driven by higher inflation is without the requisite improvement in the labor market is not a combination that will help the dollar. This spike in inflation has also come as weekly jobless claims have slightly underwhelmed in their improvement. This means that with breakeven inflation rates rising faster than the nominal yields, the downward pressure on “real” yields will weigh on the dollar.
All this does not help the Federal Reserve either. The Fed will have an interested eye on the spiking levels of inflation and is looking for the labor market to play catch up. This will only make the communication from the FOMC next Wednesday that much harder.
DATA: 14:30 *(US) MAY CPI M/M: 0.6% V 0.5%E; Y/Y: 5.0% V 4.7%E - CPI (ex-food/energy) M/M: 0.7% v 0.5%e; Y/Y: 3.8% v 3.5%e - CPI Index NSA: 269.195 v 268.681e- CPI Core Index SA: 275.718 v 275.058e Related ( KMX EUR/USD USD/JPY AN JPY/USD SPY TLT SHY INFLX TRUE FXY CVNA ) - Source TradeTheNews.com
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