Consumer prices surpassed expectations in April, rising a firm 0.3%. The core index surged above the consensus median as well, posting a strong 0.6% MoM increase. These figures bode well for the US dollar, economists at TD Securities report.

Core services shock

“Consumer prices surpassed expectations in April, rising a firm 0.3% MoM. The core index surged above the consensus median as well, posting a strong 0.6% MoM increase led by strengthening services inflation.”

“The positive surprise in core prices will not be favorable for currencies not named the US dollar.”

“We think the market is far too premature in reducing the Fed's optionality set for tightening. This should leave the USD resilient for now.”