Tuesday's CPI report serves as the week's primary catalyst, with analysts projecting a 0.21% core inflation print that reinforces the case for a December rate hike despite the absence of year-over-year comparisons.
Tuesday's CPI is the week's key event, with forecasts of 0.28% headline and 0.21% core month-over-month. Softer core inflation would only offer limited relief, since it still supports the call for a December rate hike, which is dollar-supportive. However, the outcome depends on the actual print versus these forecasts.
Headline inflation is forecast at 0.28% and core inflation at 0.21% month-over-month; no year-over-year readings are available because of last October's shutdown-related data gap.
Even a softer core reading is expected to still leave the case for a December rate hike intact, which would generally support the dollar; a much weaker print could challenge that view.
The CPI report on Tuesday and the maintained call for a December rate hike point to rates staying higher, which would tend to lift benchmark Treasury yields. The lack of year-over-year data due to the October shutdown gap adds uncertainty to how markets digest the print.
The inflation print feeds into the outlook for a December rate hike; expectations of higher rates generally push benchmark yields up.
Markets brace for Tuesday's CPI report, with forecasts pointing to a 0.28% headline and 0.21% core month-over-month increase. While investors seek relief from recent upside surprises, the data is expected to keep a December rate hike firmly on the table, providing underlying support for the US Dollar and Treasury yields.
Year-over-year comparisons are unavailable due to a data reporting gap caused by the government shutdown last October.
Even if core inflation prints softer than expected, the current outlook suggests it will not be enough to derail the case for a December rate hike, keeping yields and the dollar supported.