August US Core Price Index (CPI) report easily beat expectations, reinforcing the case for the same USD-positive near-term forecasts as economists at Credit Suisse had last week.

No reason in the short-term to change key calls end-Q3

“Looking at the immediate future, the balance of risk has tilted from concerns about a possible weak US CPI number to instead thinking about whether a 100 bps Fed rate hike is on the slate for the 21 Sep FOMC. In this circumstance, the near-term path of least resistance for USD is to keep rising, at least until a 100 bps Fed rate hike is at least 50% priced in.” 

“We see no reason in the short term to change our key calls end-Q3 calls such as EUR/USD 0.9700, USD/JPY 145 (with a risk to 150), AUD/USD 0.6550, USD/CNH 7.05 and GBP/USD 1.1250.”

“The fact that equity markets are under pressure due to higher US rates, and the VIX is back close to 30 also tends to help the greenback, as a rule.”