U.S. Consumer Prices Remain Unchanged in December

The United States Labor Department reported that consumer prices were unchanged in December from November. The rate was lower than analysts’ expectations of an increase of 0.1%. The 2011 consumer price index for all Urban Consumers came in at 3.0% lowering from the 3.4%, through the month of November year average. The energy index declined 1.3% in December counterweighing increases in other indexes. The lowered energy index was due to the decreases in the home energy and gasoline indices. Additionally, stores had cut prices to bolster holiday sales. This supported the Fed’s expectation that inflation will remain contained. Retailers had provided discounts to encourage consumer activity. Consumers have been experiencing stagnant incomes and lower home values. If inflationary levels continue to ease, additional steps can be taken by the Federal Reserve towards stimulating economic growth. The Fed is scheduled to make its interest rate decision next week. Core prices increased 0.1% after a 0.2% increase in November. This brought CPI to a 2.2% increase for the year, a high not seen since 2007. Indexes that included tobacco, recreation, shelter and medical care all saw increases.

In other U.S. news, fewer Americans filed for unemployment benefits last week. First-time unemployment claims came in at 352,000 for the week ending January 14^th less 50,000 from the previous week. This is the lowest weekly count since the month of April in 2008. This eased concerns of post holiday lay-offs and resulted in lower than the 384,000 figure projected by analysts.

Additionally, the Commerce Department reported new house start ups came in lower for December than what had been expected by analysts. New house startups resulted in a 657,000 annualized rate reducing by 4.1% for the month.                                                                                                               

The EURUSD continued its rally higher today on positive risk sentiment. Bond auctions out of France and Spain have been successful this week despite the rating downgrades. Resistance for the EURUSD is seen at 1.3070 and support is seen at 1.2750. 

Eugene Ross, Analyst

Admiral Markets

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