IRAN: "IRAN'S FOREIGN MINISTER TELLS SAUDI COUNTERPART TEHRAN IS READY [...]

We've published our review of the August inflation round - Download Full Report Here

• While August’s inflation data didn’t show a major acceleration in underlying pressures, nor will they have offered comfort to Fed participants who are looking for more decisive indications of progress toward the 2% target.
• Core CPI rose 0.29% M/M, above the 0.22% consensus and July’s 0.22%. The upside surprise was driven by supercore inflation, with core goods coming in on the soft side of expectations.
• Headline CPI was broadly in line with consensus. The monthly acceleration reflected a rebound in energy prices, while food inflation remained relatively tame. Grocery prices were flat, but food away from home remained on the warm side and indicative of continued service-sector price pressures.
• The main upside drivers in core were arguably outliers: a record increase in wireless telephone services, a rebound in lodging, and less-negative car insurance. Housing was softer than expected, while medical services were relatively benign.
• Some aspects were somewhat less concerning than the core reading suggested: median and trimmed-mean measures were softer, while dispersion measures showed some moderately encouraging developments.
• However, inflation remained broad and elevated by pre-pandemic standards, and supercore trends picked up from softer prior readings.
• The PPI report showed more moderate pipeline pressures compared to July, but run rates remained elevated amid continued energy passthrough. PCE-relevant components—including airfares and parts of healthcare -- looked on the firm side.
• As a result, core PCE tracking moved into the 0.25–0.30% M/M area (vs 0.21-0.22% coming into the inflation round), with consensus clustered in the high 0.20s. That would translate roughly into a 2.7-2.8% core PCE run rate on a 3-month annualized basis, with Y/Y continuing to run well above 3%.
• Gov Warsh and most of the FOMC are unlikely to be convinced that this represents anything close to a resumption of disinflationary progress. Accordingly, the data were enough to see market-implied pricing for a September Fed hike firm to well over 80%, from under 60% prior to PPI.

Analyst estimates for August core PCE picked up again after Friday's CPI data. Prior to the release, an early median of analysts had seen core PCE at 0.24-0.25% M/M, similar to 0.25% in July; it had been around 0.21-0.22% pre-PPI; consensus now appears to be clustered in the high 0.20s.

• Barclays: 0.25% (was 0.22% pre-CPI, 0.23% pre-PPI)
• Goldman Sachs: 0.26% (0.24% pre-CPI, was 00.22% pre-PPI)
• Nomura: 0.278% (0.245% pre-CPI, was 0.205% pre-PPI).
• BofA: 0.30% (was 0.26% pre-CPI, 0.24% pre-PPI)
• TD: 0.32% (0.24% pre-CPI,  was 0.18% pre-PPI)
• Mizuho: 0.3% (under old methodology and 0.4% under new methodology)

• RES 4: 1.4175 High Jul 13
• RES 3: 1.4129 High Jul 28  
• RES 2: 1.4080 High Aug 4 and 5 
• RES 1: 1.3917/3940 50-day EMA / High Sep 2  
• PRICE: 1.3872 @ 16:32 BST Sep 11
• SUP 1: 1.3732 Low Aug 21 and the bear trigger
• SUP 2: 1.3715 76.4% retracement of the May 1 - Jun 24 bull cycle
• SUP 3: 1.3672 Low May 12
• SUP 4: 1.3620 Low May 7

The trend in USDCAD remains bearish. The reversal on Sep 2 reinforces a bear theme and the move down leaves a key near-term resistance at the 50-day EMA, at 1.3917, intact. A clear break of this average is required to strengthen any short-term bull theme and this would signal scope for a stronger retracement of the Jun 24 - Aug 21 bear leg. For bears, attention is on key near-term support at 1.3732, the Aug 21 low.