U.S. headline inflation and core rate rise sequentially in July

U.S. headline consumer prices rose sequentially in July, coming in line with consensus expectations. The consumer price index rose 0.2 percent sequentially, while the core CPI, which excludes food and energy, also rose 0.2 percent in the month. On a year-on-year basis, the headline inflation remained unchanged at 2.9 percent, while the core rate rose to 2.4 percent, reaching its highest level since September 2008.

Energy prices dropped 0.5 percent sequentially, falling for a second straight month. Food prices rose modestly by 0.1 percent. Core goods prices rose for the first time in five months, rising 0.1 percent sequentially while core services accelerated to 0.3 percent from 0.2 percent.

Inflation in the U.S. has yet to show major signs of acceleration, but July marked a step in this direction, noted TD Economics in a research report. With the rise in prices, the Fed’s preferred core PCE metric is expected to have reached 2 percent on a year-on-year basis in the month.

The labor market is tight, with more job openings than people to fill them, domestic demand is being buoyed by tax cuts and spending, and tariffs will soon raise the price of imported consumer goods.

“With both inflation and employment at target, the economic data are supportive of the Fed's expected path for interest rate increases, with two more likely before the year comes to a close”, added TD Economics.

At 16:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was highly bullish at 132.149. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex