Forexlive Americas FX news wrap 11 Sep: US CPI data is mixed with core rising

• Snapback day. Major indices close higher after trading sharply lower earlier in the day.
• Crude oil futures settled at $67.31
• Fed IG said Atlanta Fed Pres. Bostick violated Fed rules on trading
• US 30 year mortgage rates lowest in 20 months at 6.11%
• The US treasury auctions of $39 billion of 10 year notes at a high yield of 3.648%
• Goldman Sachs Solomon on CNBC. Sees 2 maybe 3 cuts. Could see possibility of 50 BP cut
• Weekly US EIA crude inventories 0.833M build vs build of 0.987M estimate
• Geopolitics: Russia’s Putin says maybe Russia should think about export restrictions
• Reuters Poll: BOE to cut bank rate by 25 basis points one more time this year
• Citigroup sees a 25 bp rate cut in September down from 50 bps prior to CPI
• Kickstart the FX trading day on Sept 11 w/a technical look at the EURUSD, USDJPY & GBPUSD
• Remembering those who died on September 11, 2001
• US August CPI 2.5% YoY versus 2.6% expected
• The JPY is the strongest and the NZD is the weakest as the NA session begins
• ForexLive European FX news wrap: Yen firms as yields fall, US CPI up next
• US MBA mortgage applications w.e. 6 September +1.4% vs +1.6% prior

US CPI was released at 8:30 AM ET and the core measure disappointed with a 0.3% gain (estimate 0.2%). The year on year for came in at 3.2% as expected and unchanged from last month. On a more positive spin, the headline number came in as expected at 0.2% (but unrounded below 0.2%). The YoY dipped to 2.5% from 2.9% last month.

Real weekly earnings rose by 0.5% versus -0.2% which is indicative of increased productivity.

The markets initially reacted negatively to the data with yields moving higher and stocks moving lower. The US dollar also extended to the upside.

At session lows the Dow industrial average was down -740 points with all 30 down stocks negative on the day, but is closing the day up 124.75 points.. The NASDAQ index fell -238 points at session lows or -1.40%, but is closing the day higher by 2.17% up 369.65 points.

US yields are ending the day higher but off their highest levels:

• 2 year yield, 3.649%, +4.1 basis points
• 5 year yield 3.450%, +2.3 basis points
• 10 year yield 3.661%, +1.7 basis points
• 30 year yield 3.976%, +2.2 basis points

The US treasury successfully auctioned off 39 thing dollars of 10-year bonds with a negative tale of -1.4 basis points. For the second auction in a row, the demand was buoyed by strong international demand.

Looking at the strongest to the weakest of the major currencies, the AUD is the strongest while the CHF is the weakest. The USD is sitting in the middle of the range as the market adjusts to a Fed that will cut but not by 50 bps at the meeting next week.

The AUD was supported by the risk-on flows. The CHF lost some of its safety flows and is extending above the 38.2% retracement of the move down from the mid-August high. That level comes in at 0.8517. The current price is trading at 0.8525.

Tomorrow, US PPI will be released with expectations of 0.1% for the headline and 0.2% for the core reading. Many more important would be the initial jobless claims as the market since be content that inflation is fairly under control. The concern is a deterioration in the employment picture. The initial jobless claims are expected to remain unchanged 227K. Also of importance tomorrow will be the ECB rate decision at 8:15 AM ET.

This article was written by Greg Michalowski at www.forexlive.com.