Trading the News: U.S. Consumer Price Index (CPI)
Updates to the U.S. Consumer Price Index (CPI) may sap the near-term rebound in EUR/USD[1] as the headline and core reading for inflation are projected to pick up in May.
Data prints pointing to heightening price pressures may push the Federal Open Market Committee (FOMC) to signal a more aggressive approach in normalizing monetary policy, and the central bank may continue to prepare U.S. households and businesses for higher borrowing-costs as ‘the Committee expects that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate.’ As a result, indications of stronger inflation may heighten the appeal of the greenback as it fuels expectations for four Fed rate-hikes in 2018.
However, a batch of below-forecast prints may fuel the near-term rebound in EUR/USD as it encourages the FOMC[2] to tolerate above-target inflation, and Chairman Jerome Powell and Co. may continue to project a neutral Fed Funds rate of 2.75% to 3.00% as ‘inflation on a 12-month basis is expected to run near the Committee's symmetric 2 percent objective over the medium term.’ Sign up and join DailyFX Currency Analyst David Song LIVE[3] to cover the U.S. CPI report.
Impact that the U.S. CPI report has had on EUR/USD during the last release
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Period |
Data Released |
Estimate |
Actual |
Pips Change (1 Hour post event ) |
Pips Change (End of Day post event) |
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APR
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