No USD strength without inflation

Also the Fed Board member Daniel Tarullo has now revealed that he is one of the FOMC members who do not consider a rate hike before year-end to be appropriate. Before taking the step he wants to see tangible evidence that inflation is actually rising. 

He is likely to have the market on his side, as it too does clearly not believe in rising inflation. Otherwise it would also have to believe in rising interest rates. The next possibility to obtain tangible proof of rising inflation is the publication of the September inflation data tomorrow. 

"However, producer price data can give a sneak preview. A proper rise in prices is not expected before October when the fall of the oil price towards the end of last year is increasingly disappearing from the yoy comparison of inflation data", says Commerzbank. 

So for the time being it is simply going to be too early to provide the necessary proof for Tarullo and the FX market. While that is the case, a stronger USD will take a little longer, in particular as today's retail sales might also disappoint. Which will be due solely to falling petrol prices and not an easing of economic momentum. So longer term the reasons for a stronger dollar remain in place.