US CPI data and ECB meeting today
The dollar has held onto the gains it made during the course of Tuesday’s session notwithstanding slightly softer than forecast producer price inflation data in the US yesterday. The US consumer price inflation report for August is the key economic data release today, while the ECB announces its latest monetary policy decision this afternoon. Ahead of the day’s events, the euro and sterling are trading at about $1.1690 and $1.35 against the dollar respectively and EURGBP is hovering around £0.8650.
US government bonds outperformed with yields falling 2-4bps across the curve, reversing some of the previous day’s increase, while German and UK yields were flat to marginally higher on the day. It was a mixed session for equity markets with European stocks finishing slightly lower but the S&P 500 chalking up modest gains of around 0.3% (enough for it to close at a fresh all-time high).
Yesterday’s producer prices data in the US showed headline output prices fell by 0.1% month-on-month in August, pushing the year-on-year increase down to 2.6% from 3.1% in July. Core output prices (i.e. excluding energy and food as well as some other volatile items) rose by 0.3% on the month, pushing the y-o-y rate increase up a touch to 2.8% from 2.7%.
The latest RICS survey of the UK housing market is relatively downbeat. It “signals a continued slowdown in sales market activity, with most parts of the UK now seeing a decline in the volume of new buyer enquiries coming through…moreover, forward-looking sentiment points to this subdued backdrop remaining in place over the coming months, while the consensus view among respondents for the year ahead has turned largely flat.”
Today’s US CPI data are expected to show headline and core consumer prices both rose by 0.3% in August, according to the consensus forecast. This would leave the annual rate of headline inflation at 2.9%, up from 2.7% in July – and more than half a percentage higher than its 2025 to date low of 2.3% in March – and would keep the core inflation rate unchanged at 3.1%. The ECB, meanwhile, is almost certain to keep the deposit rate unchanged (2%) for a second consecutive meeting, with its updated macroeconomic forecasts likely to show underlying inflation continuing to run close to its 2% target.