When is the US consumer inflation (CPI report) and how could it affect EURUSD?

US CPI Overview

Wednesday's US economic docket highlights the release of the critical US consumer inflation figures for June, scheduled later during the early North American session at 12:30 GMT. The headline CPI is anticipated to rise by 1.1% during the reported month, up from the 1.0% in May. The yearly rate is also expected to rise to 8.8% in June from the 8.6% previous. Meanwhile, core inflation, which excludes food and energy prices, is projected to hold steady at 0.6% in June and tick down to 5.8% on yearly basis from 6% in May.

Analysts at Deutsche Bank offered a brief preview of the upcoming data and explained: “We note that while gas prices fell in the second half of June, the first half strength will still be enough to help the headline CPI print (+1.33% forecast vs. +0.97% previously) be strong on the month but with core (+0.64% vs. +0.63%) also strong. We have the headline YoY rate at 9.0% (from 8.6%) while core should tick down from 6.0% to 5.8%.”

How Could it Affect EURUSD?

Ahead of the key release, the US dollar was seen consolidating just below a two-decade high touched on Tuesday. A stronger-than-expected US CPI print would reaffirm market bets for a more aggressive policy tightening by the Fed and provide a fresh lift to the buck. Conversely, a softer reading is more likely to be overshadowed by the darkening global growth outlook, which should continue to benefit the greenback's relative safe-haven status. This, along with concerns that the energy crisis in Europe could drag the region's economy faster and deeper into recession, suggests that the path of least resistance for the EURUSD pair is to the downside.

Eren Sengezer, Editor at FXStreet, offered a brief technical outlook for the EURUSD pair: “Following Tuesday's recovery, the Relative Strength Index (RSI) indicator on the four-hour chart climbed above 30. Additionally, the pair edged higher toward the upper limit of the descending regression channel coming from late June. Both of these developments point to a technical correction rather than a reversal.”

Eren also outlined important technical levels to trade the EURUSD pair: “In order to continue to push higher toward 1.0100 (psychological level, 20-pierodSMA) and 1.0150 (static level), the pair needs to clear 1.0050 (static level) and start using that level as support.”

“On the other hand, EURUSD could face increasing bearish pressure and fall toward 0.9950 (static level from November 2002) and 0.9900 (psychological level) if buyers fail to defend 1.0000 (psychological level, multi-year lows set on July 12),” Eren added further.

Key Notes

  •   US CPI June Preview: Can the Fed evade a recession?

  •   US June CPI Preview: Dollar rally could lose steam on soft inflation data

  •   EURUSD Price Forecast: Parity holds the downside… for now

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 the 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).