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Inflation Rises In Line With Expectations

USD bulls were given some encouragement this week as the latest data showed May inflation in the US printing in-line with expectations, with the headline measure rising 0.2% month-over-month. This latest increase raises the inflation rate to 2.8% from 2.5% in April, marking the fastest increase since 2011. The increase in inflation was driven mainly by higher gasoline prices which increased by 1.7% month-over-month, offsetting the declines seen elsewhere in other energy components alongside no movement in food prices.

Core CPI also came in-line with the market forecast, rising 0.2% month-over-month, moving the annual core reading up to 2.2% from 2.1% over the prior month. However, core goods remained soft, falling -0.1% on the month and declining -0.3% on the annual reading. The recent bout of USD strength is potentially acting to further constrain the already limited pass through effects from past USD depreciation.

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