USD: Long-awaited CPI may not tell us much – ING

Today’s US CPI for September ends a long drought of hard data due to the shutdown. But we don’t expect it to generate a material pick-up in FX volatility. Our call for core CPI is 0.3% MoM and 3.2% YoY – very close to the consensus 0.3%/3.1%. For headline CPI, we are fully aligned with the consensus 0.4% MoM/3.1% YoY, ING's FX analyst Francesco Pesole notes.

Fed can cut and signal more easing ahead next week

"Despite tariff-led price pressure in some sectors, there are indications that airfares, hospitality and housing should be a drag on the CPI basket. With headline and core close to 3.0%, the Fed can cut and signal more easing ahead when it meets next week. But markets are fully pricing in 50bp by year-end, and without any jobs data at hand, it will be hard to speculate much beyond the December meeting."

"A potentially more impactful development for FX is the ongoing commodity spillover of US sanctions on Russian oil producers. A few reports now suggest some Indian and Chinese refineries are considering halting imports of Russian oil. A meaningful reduction in Russian oil supply (which we didn’t see after previous sanctions) could drive Brent prices back to the 70-75$ range."

"These are levels that would drive some noticeable dollar appreciation. So far, the FX impact of the oil price spike has been particularly visible in a Norwegian krone rally and added pressure on the yen, which incidentally keeps discounting domestic risks."