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US Inflation Figures Remain Inline

James Boston
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The US Federal Reserve has committed to maintaining near zero interest rates while unemployment remains above 6.6% and inflation holds below 2%. Newly appointed Fed Chair, Janet Yellen, will have a considerable amount to think about as she embarks for her first G20 meeting later this weekend.

**The Core US Consumer Price Index figures for January (YoY) have just been released, the headline figure is 1.6% and the ex Food and Energy figure is also 1.6%, both were anticipated to come in at exactly this level.**

The cold winter is being blamed for much of the lacklustre US recovery, several Federal Reserve policy makers have attempted to re-iterate core US strength and a commitment to the stated Fed policy of a very gradual reversal of loose monetary policy.

It is likely therefore that the same cold winter has contributed to today’s inflation numbers, this will go someway to interpreting the markets muted reaction to the all important figures.
The US Dollar picked up some strength overnight, partly due to sell offs in other currencies and in reaction to agreeable FOMC minutes published last evening, but also in anticipation of a stable inflation figure. EURUSD had dropped below the key 1.37 level and remained stuck in the mid to high 1.36’s with the occasional test of 1.37.

The publication of CPI figures have confirmed that inflation is well in check and well below the 2% threshold that would prompt a reaction from the monetary authorities. The removal of this threat, although minor, has lead to a dollar sell off sufficient to push EURUSD back up through the 1.37 level, initially hitting the 1.3716 momentum has dropped away and the currency pair has found stability in the very low 1.37s but with ample support at the 1.37 figure itself it is more than likely to move higher than lower in the coming hours.

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