When is the US CPI report and how could it affect EUR/USD?

US CPI Overview

Wednesday's US economic docket highlights the release of the critical US consumer inflation figures for October, scheduled later during the early North American session at 13:30 GMT. The headline CPI is expected to edge higher to 0.5% during the reported month from the 0.4% rise recorded in September. The yearly rate is anticipated to ease a bit to 5.3% in October from 5.4% previous, matching the biggest monthly gains since August 2008. The core CPI, which excludes food and energy prices, is projected to hold steady at 4.0% in October from a year ago, still well above the Fed's average annual 2% target.

According to analysts at ING: “This week’s CPI data is likely to show a re-acceleration in annual inflation to 5.8% for the headline rate (the highest since December 1990) and to 4.4% for core (ex-food and energy). Surging housing costs, labour costs, energy costs and second-hand car prices are likely to mean headline inflation then pushes above 6% in December, with core inflation moving above 5%.”

How Could it Affect EUR/USD?

A stronger print will reinforce market expectations that the Fed would adopt a more aggressive policy response to contain the faster than anticipated rise in inflationary pressures. This should result in higher US Treasury bond yields and a stronger US dollar. Conversely, a softer print – though seems unlikely – might prompt some selling around the greenback, though the risk-off impulse in the markets should help limit deeper losses. This, in turn, suggests that the path of least resistance for the EUR/USD pair is to the downside.

Meanwhile, Eren Sengezer, Editor at FXStreet, offered a brief technical outlook for the EUR/USD pair: “The Relative Strength Index (RSI) indicator on the four-hour chart fell below 50 in the early European session on Wednesday, suggesting that sellers are trying to dominate the pair's action.”

Eren also outlined important technical levels to trade the major: “As of writing, the pair was testing the 1.1580/70 (50-period SMA, static level) support area and additional losses could be witnessed if this area turns into resistance. The next target on the downside is located at 1.1530 (static level) ahead of 1.1500 (psychological level).”

“On the flip side, the first hurdle aligns at 1.1600, where the 100-period and 200-period SMAs collide. This level proved to be a stiff resistance since the start of the week and bulls are unlikely to commit to a decisive rebound unless the pair manages to make a daily close above it. 1.1620 (static level) and 1.1650 (static level) could limit the pair's upside in the short term,” Eren added further.

Key Notes

  •   US CPI Preview: Forecasts from 10 major banks, reacceleration in the monthly prints

  •   EUR/USD Forecast: Will euro break out of range on US CPI data?

  •   EUR/USD: Minor rebound viewed as corrective, 1.1495 level to watch – Commerzbank

About the US CPI

The Consumer Price Index released by the US Bureau of Labor Statistics is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The purchasing power of USD is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally speaking, a high reading is seen as positive (or bullish) for the USD, while a low reading is seen as negative (or Bearish).