U.S. consumer price inflation likely to have accelerated in March

The U.S. consumer price inflation data for the month of March is set to release tomorrow. According to a TD Economics research report, the headline inflation is likely to have accelerated to 1.9 percent from February’s 1.5 percent, reflecting a solid 0.4 percent seasonally adjusted sequential rise. A sharp rise in gasoline prices of 7.7 percent is likely to have been the main driver.

Meanwhile, core inflation is likely to have risen 0.2 percent sequentially, but on the soft side. OER is expected to have moderated after its outsized 0.33 percent gain in the prior month. This should be partly countered by a recovery in core services ex-shelter, permitting overall core services to print a stable 0.2 percent rise.

Core goods prices are likely to have normalized after a fairly sharp fall in February, but it is unlikely to be a strong recovery, owing to soft imported goods prices. Upward tariff-related impacts have possibly waned by now too.

February inflation and the projection for March implies that the downward trajectory in core PCE inflation might continue through March. The core PCE had come in at 1.8 percent year-on-year in January, down from an upwardly revised 2 percent in December.

“We expect core PCE to hold at 1.8 percent y/y in February (but fall on an unrounded basis) and slide further to 1.7 percent in March. A slip to 1.7 percent by February cannot be ruled out”, added TD Economics.

At 17:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was neutral at -46.6383 more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex