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Headline CPI +0.4% vs +0.3% expected. Prior +0.6%.
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Core CPI +0.3% vs +0.2% expected. Prior +0.3%.
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Three-month annualized pace through October: +5.7% headline and +3.7% core, based on the compounded seasonally adjusted monthly readings.
October details compared with September, seasonally adjusted
- Shelter +0.3% vs +0.4%. The pace slowed, but shelter still accounted for more than 30% of the headline increase. Owners’ equivalent rent rose 0.3%, while rents rose 0.2%.
- Transportation services +0.8% vs +0.6%. Auto insurance accelerated to +0.7% from +0.1%. Airfares rose 0.4%, down from 1.2%. Used cars and trucks provided an offset, falling 1.2% after rising 0.7%.
- Recreation +0.8% vs +0.5%. Price increases picked up for a second area of the core basket.
- Food +0.5% vs flat. Grocery prices rebounded 0.4% after falling 0.1%. Beef rose 0.9%, while fruits and vegetables and dairy each rose 0.6%.
- Energy +0.7% vs +5.2%. Gasoline rose 1.0% after September’s 9.1% jump, but electricity accelerated to +0.9% from +0.2%.
The Nasdaq Composite is leading the move lower in the early reaction, down 322 points. The S&P 500 is down 46 points, and the Dow is down 109 points. Headline inflation slowed as the rise in gasoline prices moderated, but core CPI rose 0.3% for a third straight month. Shelter still accounted for more than 30% of the headline increase, and transportation services accelerated to +0.8% from +0.6%.
Treasury yields rise, led by the front end
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2-year yield 4.687%, up 14.0 basis points
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5-year yield 4.764%, up 10.5 basis points
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10-year yield 4.934%, up 7.2 basis points
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30-year yield 5.292%, up 3.6 basis points
Traders are pricing in nearly a 100% chance of at least a 25-basis-point hike in December, with about a 12% chance of a 50-basis-point move. The market is also pricing roughly a 54% chance of another hike in January. The 2-year yield rose nearly twice as much as the 10-year as traders repriced the near-term Fed path.
EURUSD and GBPUSD break back below their 200-hour moving averages
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EURUSD is trading at 1.1187, down 0.32%, with the session low at 1.1180. The 200 hour MA has been broken at 1.1196 and is now close risk. Swing area at 1.1152 to 1.1160 is the next target.
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GBPUSD is trading at 1.3398, down 0.31%, with the session low at 1.3391. The price traded below the 100 day MA at 1.3395 but the decline has slowed near the level. Other MAs including the 200 day MA has been broken at 1.34169 (risk level now).
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USDJPY is up 0.34% at 158.43. The price still remains below the 200 day MA at 158.68. The price needs to get and stay above that level. The 100 hour MA at 158.12 and the 200 hour MA at 157.99 are risk levels.
Crude oil is down -2.4% at $84.47. The low reached $83.88. The high reached $86.93. The price is moving from its converged 100 and 200 day MAs at $87.15. Stay below is more bearish today and going forward.
Gold is moving lower on the back of the higher yields and higher USD. The price is down -$89 at $4051.50. The price is back below the 100 hour MA at $4090..07 but above the 200 hour MA at $4024.66 (the next target). The low reached $4039 so far.
Quick analysis
The 200-hour moving averages are the close-risk barometers for EURUSD and GBPUSD. Stay below them and sellers can lean against those levels, with 1.1180 and 1.3391 the first downside tests. A move back above the respective averages would weaken the bearish bias and put the breaks at risk of failing.
What this report measures
The Consumer Price Index tracks what households pay for goods and services. Core CPI excludes food and energy. The three-month annualized rate shows how much prices would rise over a year if the latest three-month pace continued and given Wallers comments, can bring in a 50 bp hike in December. One could argue that the Fed absent the election, should have hiked in October but held off for political reasons. Nevertheless, the 12% number for 50 bps is still low.
This article was written by Greg Michalowski at investinglive.com.