According to the latest Bureau of Labor Statistics (BLS) figures, as expected, consumer price inflation slowed slightly to 3.1% in the twelve months to November, down from 3.2% in October. Over the same period, the core measure, which removes energy and food prices, also came in as expected at 4.0% and was also unchanged at 4.0% in October.

From October to November, headline inflation increased slightly to 0.1%, up from 0.0%, while the monthly core measure came in as expected and rose 0.3%, up from the 0.2% gain.

Overall food prices increased +0.2% increase in November, down from October’s +0.3% gain with ‘food at home’ slowing to a +0.1% gain from +0.3% in October. Gasoline prices fell -0.6% in November from -0.5% in October, though electricity prices jumped +1.4% from +0.3% over the same period.

There is clearly some development in the latest inflationary report, but getting inflation back to target is likely to prove challenging.

FOMC Rate Decision

Market pricing remains unchanged for tomorrow’s FOMC rate announcement: fully pricing a no-change and leaving the Fed Funds target range at 5.25%-5.50%; 110bps of cuts are priced in for 2024 versus 117bps priced in before the release of the latest inflation numbers.

Tomorrow’s rate decision will accompany the Summary of Economic Projections (SEP). The post-rate statement and presser 30 minutes after the rate decision will likely repeat that the central bank wants to see more easing in inflationary pressures and is likely to keep that door firmly ajar for additional policy tightening if needed in the future. It is very unlikely any talk of cuts will be seen.

US Dollar Index

The US Dollar Index—the geometrically average weighted value of the USD against six major currencies—popped to a high of 103.80 before dropping back to a low of 103.49 and then engulfing the previous high and staging an advance north.

Ultimately, the week-ahead post for the US Dollar Index remains unchanged (italics):

Technical evidence is largely in favour of buyers this week: the long-term trend is to the upside on the monthly scale, and the daily timeframe’s trend is also showing signs of reversing north, along with daily support from 103.62 and the 200-day SMA holding ground. This is in addition to the RSI indicators on both the monthly and daily timeframes favouring buyers at the moment.

Therefore, charts could see traders seek a bullish scenario from current support around 103.62 on the daily chart, with additional buyers expected to commit should a breakout beyond daily resistance unfold at 104.15, targeting daily resistance at 105.04.

Charts: TradingView

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