Dollar Dives, Yields Plunge As CPI, Retail Sales Miss “Bigly”

As we wrote earlier this morning, the Fed will almost surely hike this afternoon, but traders will be watching CPI and retail sales first and indeed, those prints may end up dictating the direction of the dollar and yields more so than the Fed depending on how anti-climactic Yellen turns out to be.

“Investors treated surprisingly soft inflation results in March with skepticism, however, a cooler-than-expected outcome for April, as well, lent credibility to the dovish narrative that achieving the Fed’s inflation target may remain difficult for some time to come,” Bloomberg reminds you.

Well, we just got the data and it missed across the board. The reaction was swift:

USD DROPS TO SESSION LOW AS CPI, RETAIL SALES BELOW ESTS

TREASURIES SURGE AFTER WEAK MAY RETAIL SALES AND CPI; 10Y 2.16%

Actual

U.S. May CPI Fell 0.1%, Below Est.
Ex. food, energy up 0.1% vs est. 0.2%
CPI y/y rose 1.9% vs est. up 2%
CPI NSA index level at 244.733
U.S. May Retail Sales Fell 0.3% vs Est. Unchanged
Retail sales less autos fell 0.3% in May, est. up 0.1%
Retail sales forecast range -0.3% to 0.3% from 79 economists surveyed
Retail sales rose 0.4% in April
Retail sales fell to $473.808b in May vs $475.009b in April
Retail sales ex-auto dealers, building materials and gasoline stations unchanged in May
Retail sales ‘control group’ unchanged m/m in May
Retail sales ‘control group’ excludes food services, automobile dealers, building materials and gasoline stations
Auto dealer y/y sales rose $3.5b in May to $89.2b

Estimates

Retail sales 0% m/m; range -0.3% to 0.3% (79 estimates)
Retail ex-autos 0.1% m/m; range -0.2% to 0.4% (72 estimates)
Retail ex-auto/gas 0.3% m/m; range 0.1% to 0.5% (24 estimates)
Retail control 0.3% m/m; range 0.1% to 0.7% (28 estimates)
- May’s report will probably show retail sales “got a double whammy from a drop in unit auto sales and a fall in gas prices”: Bloomberg Intelligence
- In April, retail sales rose 0.4 percent, the most in three months
CPI 0% m/m; range -0.2% to 0.3% (79 estimates)
Core CPI 0.2% m/m; range 0% to 0.3% (78 estimates)
CPI 2% y/y; range 1.9% to 2.2% (47 estimates)
CORE CPI 1.9% y/y; range 1.8% to 2% (47 estimates)
Core CPI Index SA 251.58; range 251.518 to 251.599 (3 estimates)
CPI Index NSA 244.9; range 244.791 to 245.319 (13 estimates)