Dollar Nosedives After Inflation Disappoints For 5th Month In A Row

Tyler Durden's picture

Following 'disappointing' (to some) producer price data, consumer prices missed expectations for the 5th month in a row with a mere 0.1% rise MoM (0.2% exp). Year-over-year growth in core consumer prices also slowed for the 7th straight month dropping to just 1.7% - the slowest since Jan 2015. Amid this dismal report, there is a silver lining for Americans, the cost of shelter rose just 0.1% - the smallest rise since March.


The breakdown by components

Source: @SmithEconomics

The index for all items less food and energy increased 0.1 percent in July. The shelter index rose 0.1 percent in July, its smallest increase since March. The rent index increased 0.2 percent, while the index for owners' equivalent rent rose 0.3 percent. However, the AriBNB effect keeps crushing hotels - the index for lodging away from home fell sharply, declining 4.2 percent.

The medical care index rose 0.4 percent in July, the same increase as in June. The index for prescription drugs continued to rise, increasing 1.3 percent in July after rising 1.0 percent in June. The index for hospital services rose 0.5 percent, and the physicians' services index advanced 0.1 percent.

The recreation index rose 0.3 percent in July, its largest increase since February. The index for apparel rose 0.3 percent after declining in each of the past four months. The index for airline fares also turned up in July, rising 0.7 percent following 3 months of declines. The index for motor vehicle insurance continued to increase, rising 0.3 percent.

The dollar is disappointed:

In his preview of a potential 5th consecutive CPI miss, RBC's Charlie McElligott has this to day:

US CPI (core) was always going to be the headliner of the week, as the 2.5 year global macro focus has continued to center on the debate around ‘disinflation / reflation’ range-trading around it.   Last week’s excitement around ISM Prices Paid and AHE’s beats (and 5y breakevens crossing north of 1.70 cleanly) however has been tempered by the disappointing PPI print yesterday (shouldn’t really fixate on that, as Tom Porcelli laid-out yday).  


In light of the recent market wobble though, I can now see this going two very different routes.  An ‘inline to better’ number (.2) could definitely arrest the ‘sentiment drain’ in global risk markets right now, with long-awaited signs of US inflation and data being ‘back on track’ as a catalyst for higher Dollar & rates (real yields having collapsed recently).  That said however, with regards to the current US exporter / mega-cap Tech / FAANG ‘boon’ that has been the Dollar coming unglued, it might actually add further pressure to these areas which are obviously being ‘stressed’ (on account of positioning) ‘as is’ IF we were to see a strong counter-trend rally in Dollar kick-off.


Conversely, another miss in core CPI would REALLY muck-up the picture for the Fed and rates, with the potential for the market to try and price a Dec Fed hike out entirely, along with increased expectations for the Fed to drop their ‘dot plot.’  This would likely be the next driver of leg-lower in USD and with it, open up the potential for rates to revisit 2.0% level, especially with the potential scope for $/Y to travel to 105 and what that would do for Japanese ‘mechanical’ buying (and similar Yuan / Chinese FX reserve manager flows too).  In that case, you are likely to see a return to the ‘slow-flation’ positioning narrative—long secular growth, long low risk (‘duration sensitives’) against short cyclicals…sigh.  And I also think that if this were to occur and the Euro strengthened significantly again, you are going to see folks girded to short the EU exporter-centric DAX further.


Longer-term, that will probably be a ‘fade,’ but we’ll cross that bridge when we get there.

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spastic_colon's picture

the outright lies keep piling up.......if POTUS doesnt see or address this we are screwed.....i dont know anyone who believes the inflation least anyone who is paying attention.

FreeShitter's picture

Puppet boy is too busy playing with lil kim. Im sure he will tweet something for you about this at a later date. You are right, we are screwed, but we are screwed by design.

spastic_colon's picture

i should have said we will continue to get screwed..........CPI needs to include quantity

silverer's picture

You know as well as I do that no matter who you put in office, this is beyond repair. The spin down has been going on for years. How can you dig out of a 20 trillion dollar hole with only half the country working and no increase in productivity? Now it's simply every man for himself, and as far as president goes, you either like your cheerleader on the way down or you don't, but you ARE going down.

silverer's picture

The truth is easy to find. Just make your own conclusions and mentally block out the mainstream spin:

847328_3527's picture

As the "official cpi" drops more, I see a tiny 10 oz bag of frozen veggies in the groery now at $1.62.


used to be 80 cents for 16 oz.

spastic_colon's picture

we have found it unfortunately the world central banks have figured out a way to rig a six deck shoe.............

thatthingcanfly's picture

Yeah, that's really "dismal" that the stuff I buy DIDN'T increase in price too much.

Well, gold is up!

Seasmoke's picture

Not any more. How the fuck did that happen ?? I literally read this thread and Gold dropped $6 ...... Fucking paper criminals. Kill them all.

thatthingcanfly's picture

I saw that too. Nearly right after I posted the above.

I was probably the market-mover. LoL.

I am Jobe's picture

Getting Interesting. Christmas is going to a depressing event for millions of Murikans. 

silverer's picture

Brush up on those carving skills, start working on those wood dolls.

Seasmoke's picture

That's ok. We can just replace it with Hanukah.

847328_3527's picture



At least we are allowed to say "Christmas" again and put up trees and angels and stuff. It was depressing to have the muzlim president ban Christmas stuff. Even malls pandered to Soweeto Hussein and the muzlims and failed to put up happy Christmas stuff.

It's no wonder their sales plunged as stores sough to pander to muzlims. And then you have target and jcpennys with their transgender and LGBT policies and bathrooms. No wonder parents kept their families at home and shopped online.

oh yeah, then there's bin Bama and his pet wookie pushing kwanza candles and dolls....



silverer's picture

"The dollar nosedives."

Next week:

"The dollar has rockets strapped to it, aiming right for the bottom of the Mariana Trench."

Dg4884's picture

The US economic trainwreck is com'n round the bend.  Hope you all made good choices these past years.

spastic_colon's picture

the editorial cartoon that no one will ever print has the train running downhill since 2009 and the fed, BLS, POTUS, congress etc all laughing and partying in the dining car.

ejmoosa's picture

There are two components to what the FRB calls inflation:  Declining value of the dollar and "supply and demand".

Add those two together and you get "inflation" as reported".

So if the declining value of the dollar creates 4.2% inflation and falling demand creates -4.1% inflation, we get these confusing 0.1% reports....

Demand in total is falling.

sudzee's picture

Dollar down cause China and Russia are saying your days are numbered.

World citizen's picture

Goodbye, rate hikes... goodbye (LMAO)

FreeNewEnergy's picture

If consumers won't take bait,

The Fed cannot inflate.

h/t to Johnny Cochran.

GodHelpAmerica's picture

Lmao look at these scum try to cap gold at 1290. Four weeks ago it was the 200 dma; three weeks ago it was 1260; two weeks ago it was 1270; last week it was 1280; now this week it's 1290.

It's apparent where these lines are set up bc gold has had a near perfect inverse trading pattern to the dxy, but once it approaches their arbitrary line, the correlation breaks down until the physical market overwhelms them and they then reset the line higher and the process begins again but at a higher level.

Herdee's picture

Jim Willie from Silver Doctors explains what is happening with the "SCHEISS" Dollar:

silverer's picture

You really want to spread the truth around? I watched that a while back. Hell, watch how many people jump out a window now.

rejected's picture

Soooo if I understand this correctly, we need more (inflation) debasement of our money to make it more valuable.

Well, this is the 21st century and all.....

NoWayJose's picture

Hotels down 4.2%?? I should show this story to Hilton.

Gold Fingers's picture

Ive also read Forex Kong is moving HEAVILY into Canadian Marijuana Stocks. This guy nails it - often.

Stormtrooper's picture

Hey, good combination.  The Canadians can use a bunch of that forex stuff for rolling papers.

Gods's picture

just looked into Can MJ stocks very interesting.

newbiedude's picture

The dollar is toast.

silverer's picture

No. Toast is better. At least you can eat toast.

Stormtrooper's picture

Damn!  And I have an extra $20 bucks in my pocket this month.  I was hoping to get rid of it by paying higher prices for my basic needs.

DEMIZEN's picture

can someone explain to me why is low US inflation harming dollar pairs? 

Storm-Clouds's picture

No inflation but my Nathan's hotdogs are skinnier that a crack hooker's legs!!!