The US inflation data doesn't really have a huge impact. But it stabilizes the dollar across various major currency pairs.

The release of US inflation data tonight (September 13) hasn't altered the US interest rate projections but has contributed to stabilizing the position of the US dollar in various major currency pairs. The US Dollar Index (DXY) increased slightly around the 104.60 range, USD/JPY rose approximately 0.3%, while EUR/USD slipped 0.2%.

us dollar index

The US Department of Labor reported that the Consumer Price Index (CPI) increased by 0.6% in August 2023, in line with consensus expectations. Meanwhile, the Core CPI rose by 0.3% during the same period, which was higher than the expected rate of 0.2%.

The moderate increase in US inflation rates has not altered the market's expectations regarding US interest rates. The market still believes that the Federal Reserve will maintain the interest rates at the current range of 5.25%-5.50% in the upcoming FOMC meeting next week.

Sam Stovall, the Chief Investment Strategist at CFRA Research, commented that the higher-than-expected Core CPI data introduces uncertainty to the market, especially when combined with increased yields and a stronger dollar. He mentioned that the upcoming PPI report will be closely monitored to gain insights into the Federal Reserve's actions in the upcoming weeks and November.

Stovall expects that the FOMC will pause this month but will likely raise interest rates again in November. Afterward, they are anticipated to maintain higher interest rates until mid-2024 unless there is an unforeseen recession in their economic outlook.

Brian Madden of First Avenue Investment Counsel expressed a similar perspective, mentioning that the data generally matches expectations. He pointed out that the month-over-month Core CPI, slightly higher than the consensus, is the only noteworthy deviation.

The year-over-year Core CPI has also risen, slightly exceeding consensus expectations. Madden observed the performance of bonds, the US dollar, and futures equities, noting that most showed only marginal changes in the ten minutes following the data release. He concluded that it appears improbable for these developments to influence The Fed's decision to interest rate hikes this month.

The Dow Jones index rose by 0.2%. US Treasury bond yields have also moved only slightly, approximately 0.0020 points. This means that the release of US inflation data this time has had a low impact on market participants.