U.S. CPI (Mar) Actual -0.1%, Expected 0.1%, Previous 0.4%
U.S. Core CPI (Mar) Actual 0.2%, Expected 0.1%, Previous 0.2%
Release Explanation: The CPI measures the average price of a fixed market basket of goods and services purchased by consumers, and therefore give an overall read of inflationary pressures. It is the most widely used Inflation indicator of central banks, institutions, and governments. It is used to calculate cost of living numbers for government programs. Each regional central bank will have their own CPI target rate, and each will differ in line with the way they individually want to control the aspects of their own economies.
”It can sometimes overstate inflation because it does not reflect price changes in new technology goods which are often declining in price as new innovations come into the market. Despite these criticisms, it remains the benchmark inflation index worldwide,” TheLFB-Forex.com Trade Team members noted. “CPI can be greatly influenced in any given month by movement in volatile food and energy prices, and therefore it is important to look at CPI excluding food and energy, commonly called the core rate of inflation,” TheLFB-Forex.com Trade Team members added.
Within the core rate, some of the more volatile and closely watched components are apparel, tobacco, airfares, and new car sales. In addition to tracking the month over month (m/m), the year over year (y/y) change in core CPI is seen by economists as the most reliable read of the underlying inflation rate.
”This is the be all and end all of economic releases. This report sets the tone for economic growth or contraction, and therefore eventually affects most other releases. The gauge of inflation is a report that moves markets because it gives a central bank the information they need to make rate decisions. This therefore is a big market mover as institutions adjust existing or planned positions in response to the rate of inflation and its impact on a currency, i.e. CPI higher, currency appreciation, CPI lower, currency depreciation,” TheLFB-Forex.com Trade Team members said.
TheLFB-Forex.com Trade Desk Thoughts: The Consumer Price Index (CPI) fell by 0.1% (seasonally adjusted) in March, the Labor Department said today. That was lower than the 0.1% economists had expected and the 0.4% increase seen in February. The Core CPI, which excludes volatile items such as food and energy, rose 0.2% in March, maintaining the steady pace of growth seen over the last few months.
For the year to March, the CPI is sitting at -0.4%, in un-adjusted terms, the first 12 month decline since August 1955. However, the less-volatile core CPI index was up 1.8% from one year ago, well within the range that Federal Reserve officials prefer.
TheLFB-Forex.com Trade Team noted that monthly data shows that the CPI was dragged lower by a 3.0% decrease in the energy index. At the same time, the energy index is also responsible for the yearly decline, reflecting the huge drop in the commodity market.
“Returning to the monthly Core data, the read was pulled higher by a huge 11% increase in the tobacco and smoking products index, which accounts for about 60% of the March increase,” TheLFB-Forex.com Trade Team said
Forex Technical Reaction: The release had a relatively weak response in the currency market, but the S&P futures declined 2 points during the news release. Ahead of the release, the dollar gained more than 100 pips against the euro.