- 13 Jul 2023
- ICICI Securities
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US INFLATION EASED TO 3%, SLOWEST PACE IN MORE THAN 2 YEARS AGO
News: US Inflation edged further low in June and remained below 5% for the third consecutive month . CPI on YoY basis increased by 3.0% in June 2023 compared to 4.0% in May 2023. Core-CPI which excludes energy and food rose 4.8% in June from a year earlier, ebbing from 5.3% in May. Core inflation remained elevated because of inflationary pressures from Shelter costs. Core CPI increased 0.2% in the month, first time in 6 months that it did not post monthly gains of at least 0.4%. Index for shelter was the largest contributor on monthly basis which rose 7.8% from year earlier accounting for over two-third of the total increase in all items less food and energy. Services less energy services index rose by 6.2% in June 2023 compared to 5.5% same month year ago. The energy index declined by 16.7% for the 12 months ending June, and the food index increased 5.7% over the last year. After the data huge volatility was witnessed across the asset class. Dollar Index slipped to its lowest in more than a year to 100.54 mark and stocks markets edged higher. Bond yields dropped sharply with benchmark 10-year note yields fell to 3.861% and Interest rate sensitive 2-year yields declined to 4.742%.
Views: Dollar is likely to continue with its weakness in the coming days as cooler than expected headline inflation strengthened the bets that Federal Reserve is nearing the end of its interest rate hiking cycle. Recent batch of economic data from US boosted hopes rate hike in July would be the last and US Fed could hit the brakes on its interest rate hike cycle sooner than anticipated. Recent reports of CPI signals that price pressures are not worsening and might soon be slowing further. US Dollar Index was facing strong hurdle near 103.50 levels and immediate resistance now seems to be near 102.50 level, as long as it sustains below this levels it may slip further till 99.50 levels.
Impact: Positive