Consumer prices have exceeded expectations the last three reports and substantially so in May, rising a monthly 0.6 percent overall and 0.7 percent for the core. Forecasters, as they did in both April and May, are looking for cooling in June’s monthly numbers, to 0.5 percent increases overall and also for the core. Respective annual rates, inflated by weakness a year ago, are seen at 5.0 percent and 4.0 percent which would compare with 5.0 percent and 3.8 percent in May.
While this is the largest one month gain in over thirteen years, one would think that a Fed rate hike is a given, however, on closer inspection it is used car prices that are the biggest component of the jump. Used car prices have had their biggest jump ever, since 1953 when pricing was first recorded. This is distorting the inflation numbers and it is keeping the Fed at bay, however, if other sectors start to play catchup to used cars, then rate hikes are coming.
The Canadian dollar is a bit weaker to the USD even as commodities move higher, it seems that currency traders are more worried about U.S. inflation than others, expect the CAD to trade weaker the rest of the week.