No reason to sell USD on in-line or above consensus CPI data – SocGen

US Consumer Price Index (CPI) data for September has tremendous power over sentiment. Barring a downside surprise, the US dollar is set to remain strong, Kit Juckes, Chief Global FX Strategist at Société Générale, reports.

Fed could hike rates too aggressively for too long

“Price increases are steadily spreading through to more parts of the economy. In that sense, I’d worry as much about inflation reaching more parts of the economy, as about the monthly increase.”

“Last night’s FOMC Minutes did nothing at all to diminish the sense that the Fed will want to see very clear evidence of inflation peaking before they stop raising rates and that’s extremely unlikely to emerge as soon as today. The biggest danger is still that, having started slowly, they will be raising rates too aggressively for too long.”  

“An in-line figure may offer only temporary relief as it still leaves Fed Funds on track to get to 4.5% by the end of the year, making an even more inverted curve almost unavoidable. So, if the data are in-line or above consensus, we are unlikely to see relief in the Treasury market or any reason to sell the dollar.”

See – US CPI Preview: Forecasts from 10 major banks, price pressure easing only very slowly