US CPI dips down to 4.9%

The U.S. Bureau of Labor Statistics reported that the Consumer Price Index for All Urban Consumers (CPI-U) increased by 0.4% in April on a seasonally adjusted basis, following a 0.1% rise in March. Over the last 12 months, the all items index grew by 4.9% before seasonal adjustment. The shelter index was the primary contributor to the monthly increase (up 0.4%), accompanied by growth in the used cars and trucks index (up 4.4%) and the gasoline index (up 3.0%).

The energy index increased by 0.6% in April (-5.1% year on year), while the food index remained unchanged (7.7% year on year). The index for all items less food and energy also rose by 0.4% in April, with several indexes, such as shelter and motor vehicle insurance, experiencing increases. However, the airline fares and new vehicles indexes declined during the month. The 12-month increase of the all items index was 4.9%, marking the smallest growth since April 2021. The all items less food and energy index increased by 5.5% over the last year, while the energy index fell by 5.1% and the food index rose by 7.7%.

  • The Fed funds rate (5.00% to 5.25% target range) is now above the year on year inflation rate of 4.9%
  • Yields are lower after the report with the 2 year yield now down -7.1 basis points, while the 10 year yield is down -6.6 basis points.
  • Stocks are trading higher. The premarket futures are implying the Dow industrial average up 70 points. The S&P up 16 points, and the NASDAQ index up 63 points.
  • Next month, the headline CPI MoM level from a year ago rose 1.0%. If that can be replaced by something much less (say we get used car prices back down and shelter lower), we could lop 0.8% or so from the YoY number. The number after that was a 1.3% gain. So going forward 2.3% will come out of the YoY number. Replace that with 0.6% and 1.7% and 5% becomes 3.3%.

The US dollar has moved lower:

  • EURUSD is trading to a new session high of 1.0989. The 100 hour moving average comes in at 1.1003 and the 200 hour moving average comes in at 1.1008. Those are the next upside targets. Get above, opens the upside for more gains.
  • GBPUSD is trading at 1.2658 and looks toward the swing high from Monday's trade at 1.2668. There is a swing area on the daily chart going back to April/June 2022 which peaks at 1.2665. Getting above the high for Monday and the swing high increases the bullish bias (see charts in the post from yesterday outlining the levels HERE)
  • USDJPY as broken out of the range between the 100 hour moving average below and the 200 hour moving average above. The 100 hour moving average has been broken at 134.788. The current price trades at 134.61. Stay below the 100 hour moving average keeps the sellers more in control.