Mixed data from the US: core CPI is up to 1.8% y/y, better than expected. On the other hand, the control group of the retail sales misses with 0.3%, below expectations. The retail sales numbers are accompanied by upward revisions while most inflation numbers are bang on expectations.

The USD slightly stronger in the immediate aftermath but resumes its falls just after that on the mixed data. The initial reaction of “it could have been worse” was followed by an acknowledgment that inflation is not going anywhere fast, and this is not that greenback friendly.

October inflation and retail sales (updated)

• CPI m/m: previous 0.5%, expected 0.1%, actual: 0.1%
• Core CPI m/m: prev. 0.2%, exp. 0.1%, actual: 0.2$
• Core CPI y/y: prev. 1.7%, exp. 1.7%, actual: 1.8%
• CPI y/y: prev. 2.2%, exp. 2%, actual: 2%
• Retal average weekly earnings up 0.4% y/y against 0.6% previously.
• Retail sales: prev. 1.6%, exp. 0%, actual: 0.2%
• Core retail sales: prev. 1%, exp. 0.2%, actual: 0.1%
• Retail control group: prev. 0.4%, exp. 0.4%, actual:0.3%, but with an upward revision.
• Retail ex. gas/autos: prev. 0.5%, actual: 0.3%
• NY Fed manufacturing: prev. 30.2, exp. 26, actual: 19.4.

Currency movements

• EUR/USD was trading around 1.1840, surging higher and conquering one resistance line at a time.
• GBP/USD was around 131.60, hardly reacting to the upbeat jobs report and exposing its weakness.
• USD/JPY was around 112.75, with the yen enjoying lots of safe haven flows. Weak Japanese GDP only helped the currency.
• USD/CAD was trading around 1.2760 as oil prices are sliding from the highs.
• AUD/USD was around 0.7590 amid a slow rise in Australian wages, trading at the lowest level since July.

Background

The United States was expected to report that core CPI is stuck at 1.7% once again, remaining the weak point in the picture in the US economic picture. Retail sales were expected to remain unchanged on the headline and 0.4% in the control group.

The US dollar was on the back foot against the euro and the yen while gaining ground against commodity currencies. It was stable against the pound.