The headline US CPI came in weaker than expected with a 0.3% month-on-month increase in April versus an estimated 0.4% increase. This brought the annual CPI reading down from 3.5% to 3.4% as expected.
Meanwhile, core inflation only reached the mark, showing a 0.3% monthly increase in core price pressures.
- April headline CPI: 0.3% m/m (0.4% expected, 0.4% previous)
- April headline CPI: 3.4% y/y (3.4% expected, 3.5% previous)
- Core CPI for April: 0.3% m/m (0.3% expected, 0.4% previous)
The increase in the cost of consumer goods was mostly driven by higher gasoline prices, which rose 2.8% during the month, and shelter costs, which rose 0.4% for the third month in a row.
Food costs were mostly unchanged, with supermarket prices falling mostly due to the 7.3% monthly drop in egg prices.
Market reactions
US dollar against major currencies: 5 minutes
Overlay view of USD against major currencies: 5 minutes Chart by TradingView
Dollar traders appear to be biting their nails ahead of the US CPI report, although there was a noticeable bearish bias an hour before the actual CPI report.
The US currency was sold off sharply after seeing some red in the monthly headline CPI and a decline in the annual inflation reading, as that reinforced the view that the Federal Reserve is likely to continue its easing plans for this year.
Additional bearish sentiment for the dollar may have come from the downbeat Empire State Manufacturing Index, which fell from -14.3 to -15.6 instead of improving to -9.9 this month, and the flat retail sales reading for the same month.
After the initial bearish reaction faded, the downward trajectory resumed for the rest of the trading day. The dollar suffered its largest losses against the New Zealand dollar, the yen, and the Australian dollar, while the Canadian dollar lagged behind its foreign currency counterparts.
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