Breakdown of the latest developments on the global exchanges
Oct 13, 2020, 4:00 PM GMT

US Consumer Prices Grow Marginally in September, Easing from a Month Prior

The Bureau of Labour Statistics revealed that the Consumer Price Index in the US had grown moderately at 0.2 per cent in September, which met the initial market expectations. The index thus eased from the 0.4 per cent that was recorded a month prior.

The subdued inflationary data was recorded over the first month after Jerome Powell's crucially important speech at the Jackson Hole Symposium, in which the FED Chair stated that the Central Bank would have more leeway as regards inflationary pressures in order to boost price stability.

The strategy is so far lagging in achieving its desired outcome – fostering better price stability, and driving headline inflation towards the symmetric 2 per cent target level.

The Presidential race could prove to be a major predicament for Powell and the FED as regards achieving their inflationary goals; as Donald Trump's erratic policymaking could lead to a fiscal policy that is ill-suited to work in accordance with the Bank's accommodative monetary policy.

Chiefly, the political decision of Trump to postpone the stimulus negotiations with the Democrats for after the election, on the presumption that he wins his re-election in November, is done with the intent to garner more support.

However, it could have severe implications for the tentative recovery, as postponing the stimulus checks for many Americans could impede consumer spending, which, in turn, would weigh down on the overall price stability.

Due to all of this uncertainty, many investors have started flooding to the greenback, which is once again being seen as a safe refuge in these tumultuous times.

As can be seen on the 4H EURUSD price chart below, the pair shoot down following the release of the report. Another reason for the dropdown is the roadblock hit by Johnson and Johnson in the development of a vaccine against the novel coronavirus.

At present, the pair is attempting to break down below the major support level at 1.17550. However, the pair is trading above the 100-day MA (in blue), which is serving the role of a floating support.

It is yet to be seen whether the EURUSD would continue to head further down south, or the supports would hold, in which case a swift reversal is entirely plausible.