The US publishes its Consumer Price Index report for September on Thursday, October 11th, at 12:30 GMT. The Fed has two mandates: employment and price stability. The CPI report provides a fresh update on inflation, thus impacting the Fed and the US Dollar.

Expectations: Showing that the slowdown was a one-off

The job market continues creating jobs at a healthy pace while core inflation is well-anchored around the 2% target. The Fed cares about core prices: the changes that do include energy and food, which are quite volatile. Will we see signs of inflationary pressure now?

The Fed target the Core PCE which stood at 2% YoY in August. The Core CPI had a different methodology and stood at 2.2% in August. We will now get the fresh Core CPI for September.

Back in August, core inflation decelerated to 2.2% from a cycle high of 2.4% in July. This time, an increase to 2.3% YoY is on the cards. Month over month, an increase of 0.2% is projected after 0.1% in August. All in all, expectations are for a return to normality, data that will show that August was a one-off and that price development is not slowing down.

Headline inflation carries expectations for a rise of 2.8% YoY after 2.7% beforehand, and 0.2% MoM, a repeat of last month’s increase.

Potential USD reaction

The US Dollar enjoys the back wind of robust growth in the US economy, a hawkish Federal Reserve and high bond-yields. Also, the trade war that Trump is waging with China props up the greenback which receives demand as a safe haven currency.

Therefore, if the data meets expectations, the greenback could move up. An OK figure is more than good enough. According to bond markets, there is a 3 in 4 chance for a rate hike in December, the fourth one in 2018. An OK number will be good enough for the greenback.