The dollar was initially sold on the softer than expected CPI data, but market sentiment is such that it is inclined to buy dollar dips rather than to sell into strength.
The core measure fell 0.1%, the first decline since the early 1980s. Trend measures of core CPI show a sharp deceleration. Home owners equivalent rent fell 0.1% and is an important restraint on core inflation.
PPI and import price measures were stronger than expected. Some linked the timing of the Fed's discount rate hike to the strength of the PPI report, but that is to misconstrue the discount rate hike. We think the Fed should be taken at its word that the move is an incremental step toward the normalization of monetary policy and does not change monetary conditions.
The soft core rate drives home the message that backs up the Fed speak--namely policy rates--Fed funds or the rate paid on excess reserves will remain low of an extended period of time.
Nevertheless the underlying dollar sentiment is constructive. It stands on two legs. Poor developments in general in Europe (Greece, weaker credits in general, stagnating economy) and more positive developments in the US.
The core measure fell 0.1%, the first decline since the early 1980s. Trend measures of core CPI show a sharp deceleration. Home owners equivalent rent fell 0.1% and is an important restraint on core inflation.
PPI and import price measures were stronger than expected. Some linked the timing of the Fed's discount rate hike to the strength of the PPI report, but that is to misconstrue the discount rate hike. We think the Fed should be taken at its word that the move is an incremental step toward the normalization of monetary policy and does not change monetary conditions.
The soft core rate drives home the message that backs up the Fed speak--namely policy rates--Fed funds or the rate paid on excess reserves will remain low of an extended period of time.
Nevertheless the underlying dollar sentiment is constructive. It stands on two legs. Poor developments in general in Europe (Greece, weaker credits in general, stagnating economy) and more positive developments in the US.
Dollar Slips on Soft Core, but Look for it to Bounce Back
![Dollar Slips on Soft Core, but Look for it to Bounce Back]()
Reviewed by Marc Chandler
on
February 19, 2010
Rating:
