US inflation outlook: Stable but slightly trending down

US core inflation data is slightly but consistently trending down in the last 10 releases.
A negative surprise on the US CPI data looks more likely than a positive one.

Jordi Martínez FXStreet

The US Consumer Price Index (CPI) data for the month of May is being released on Wednesday at 12.30 GMT and the market will scrutinize it, looking for hints on the Fed's thought process going into their meeting later this June. While the data is forecasted to be quite stable, which could diminish its impact on the markets, the US economy has been releasing underperforming data recently, as our FXStreet Surprise Index reflects, which has undermined the US Dollar bullish trend. After the disappointing labor market data seen in last week's Non-Farm Payrolls, another miss in the inflation numbers would look bad for the greenback prospects, increasing Fed rate cut odds.

Looking at the US inflation big picture, our table shows a majority of inflation-related indicators trending down through their last 10 releases, with basically only headline month-over-month data trending up. All core indicators, both in CPI and Producer Prices Index (PPI) but also on the Fed's preferred Personal Consumption Expenditures (PCE) data, are trending down. Wages are still comfortably rising above 3%, the most positive inflation-related indicator in all, but that rise has struggled to translate into higher consumer prices, particularly in the PCE data, which has consistently been below the Fed's 2% target.

Consumer-related inflation	Impact	Last	Trend	Last 3	Last 5	Last 10
CPI exFood/Energy YoY	3	2.10%	Down	2.07%	2.12%	2.17%
CPI exFood/Energy MoM	2	0.10%	Down	0.10%	0.14%	0.15%
CPI YoY	2	2.00%	Neutral	1.80%	1.78%	2.15%
CPI MoM	2	0.30%	Up	0.30%	0.16%	0.16%
Core PCE Price Index YoY	2	1.60%	Down	1.63%	1.72%	1.83%
Core PCE Price Index MoM	2	0.20%	Neutral	0.10%	0.12%	0.12%
PCE Price Index YoY	1	1.50%	Down	1.43%	1.48%	1.77%
PCE Price Index MoM	1	0.50%	Up	0.20%	0.12%	0.12%
PPI exFood/Energy YoY	2	2.30%	Down	2.37%	2.44%	2.50%
PPI exFood/Energy MoM	1	0.20%	Neutral	0.20%	0.20%	0.18%
PPI YoY	1	1.80%	Down	2.07%	2.02%	2.34%
PPI MoM	1	0.10%	Up	0.30%	0.18%	0.15%
GDP Price Index	2	0.50%	Down	1.30%	1.88%	1.88%
ISM Prices Paid	2	53.20	Down	52.50	51.30	58.27
Redbook Index YoY	1	5.00%	Neutral	5.50%	5.42%	5.43%
Redbook Index MoM	1	-2.60%	Down	0.03%	0.52%	0.71%

Labor-related inflation	Impact	Last	Trend	Last 3	Last 5	Last 10
Average Hourly Earnings YoY	3	3.10%	Neutral	3.17%	3.22%	3.12%
Average Hourly Earnings MoM	2	0.20%	Down	0.17%	0.20%	0.25%
Personal Income MoM	2	0.50%	Neutral	0.27%	0.34%	0.32%
Employment Cost Index	1	0.70%	Up	0.73%	0.72%	0.67%

Housing-related inflation	Impact	Last	Trend	Last 3	Last 5	Last 10
Housing Price Index MoM	1	0.10%	Neutral	0.33%	0.34%	0.29%

Trade-related inflation	Impact	Last	Trend	Last 3	Last 5	Last 10
Import Price Index YoY	1	-0.20%	Down	-0.50%	-0.56%	1.34%
Import Price Index MoM	1	0.20%	Up	0.47%	-0.02%	-0.13%
Export Price Index YoY	1	0.30%	Down	0.40%	0.42%	1.76%
Export Price Index MoM	1	0.20%	Up	0.50%	0.06%	-0.08%

Manufacturing-related inflation	Impact	Last	Trend	Last 3	Last 5	Last 10
Kansas Fed Manufacturing Activity	1	2	Neutral	10.3	5.8	6

All in all, a slightly negative surprise would look more consistent with the current inflation and macroeconomic trends than a positive one.

Author

Jordi Martínez

FXStreet

Jordi Martínez is the Editor in Chief at FXStreet, leading editorial operations at the company, before being promoted to the role in 2023, he worked in several editorial positions at FXStreet, including roles as Senior

EUR/USD flat lines below 1.1900; divergent Fed-ECB expectations offer support

The EUR/USD pair struggles to capitalize on the overnight bounce from the 1.1835-1.1830 region and oscillates in a narrow band during the Asian session on Thursday. Spot prices currently trade around the 1.1875 area, remaining nearly unchanged for the day and staying within striking distance of an over one-week high, reached on Tuesday, amid mixed cues.

GBP/USD slips heading into the Thursday trading window

The Pound Sterling pulled back from four-year highs on Wednesday, weighed down by a combination of Bank of England dovishness and UK political uncertainty, even as the US Dollar weakened on soft labor market revisions.

Gold posts modest gains above $5,050 as US-Iran tensions persist despite strong labor data

Gold price trades in positive territory near $5,060 during the early Asian session on Thursday. The precious metal edges higher despite stronger-than-expected US employment data. The release of the US Consumer Price Index inflation report will take center stage later on Friday.

Bitcoin holds steady despite strong US labour market

Bitcoin briefly bounced from $66,000 to above $68,000 but slightly reversed those gains following Wednesday's US January jobs report. The top crypto is hovering around $67,000, down 2% over the past 24 hours as of writing on Wednesday.

The market trades the path not the past

The payroll number did not just beat. It reset the tone. 130,000 vs. 65,000 expected, with a 35,000 whisper. 79 of 80 economists leaning the wrong way. Unemployment and underemployment are edging lower. For all the statistical fog around birth-death adjustments and seasonal quirks, the core message was unmistakable. The labour market is not cracking.

XRP sell-off deepens amid weak retail interest, risk-off sentiment

Ripple (XRP) is edging lower around $1.36 at the time of writing on Wednesday, weighed down by low retail interest and macroeconomic uncertainty, which is accelerating risk-off sentiment.