A considerably hotter-than-expected consumer price inflation (CPI) printing roiled markets and watched a wave of power carry the Greenback higher last week. However, a softer-than-expected retail sales print sapped strength into the weekend. An uptick in consumer inflation expectations throughout the University of Michigan’s consumer confidence survey did little to rekindle the USD.
Taper talks suggesting the Federal Reserve might need to tighten policy earlier than the markets originally believed injected a week’s run. Markets priced in a less dovish path for the Fed, supposing that the greater inflation print will last into ahead, dispelling Chair Jerome Powell’s”transitory” outlook on costs. Those assumptions were tempered to the weekend, however, the movement highlights the impact cost pressures could have on financial markets.
While we have not been without commentary from Federal Reserve members over the last few months, the coming Federal Open Market Committee (FOMC) minutes may give markets additional insight into the internal minds of the US central bank. Last week’s CPI followed the Committee meeting, but any new clues regarding how the Fed would respond to various inflationary results in the long term may impact the US Dollar.
