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

US CPI Overview

Thursday's US economic docket highlights the release of the critical US consumer inflation figures for September, scheduled later during the early North American session at 12:30 GMT. On a monthly basis, the headline CPI is anticipated to rise by 0.2% during the reported month. The yearly rate is expected to ease to 8.1% in September from the 8.3% previous. Meanwhile, core inflation, which excludes food and energy prices, is projected to come in at 0.5% for September and edge higher to 6.5% on yearly basis from 6.3% in August.

Analysts at ING offer a brief preview of the report and explain: “The headline rate will be depressed by the lagged effects of the fall in gasoline prices, which is also likely to translate into lower airline fares to some extent. However, the core (ex-food and energy) component is set to continue rising at a rapid pace. We look for a 0.4% MoM increase in prices, which would nudge the annual rate of core inflation up to 6.5% from 6.3%. This unfavourable shift is primarily due to housing costs and recreation prices and should cement expectations for a fourth consecutive 75 bps interest rate increase from the Federal Reserve on 2 November.”

How Could it Affect EUR/USD?

Data released on Wednesday showed that US Producer Price Index rose more than expected in September and fueled speculations for a similar rise in consumer inflation. A stronger CPI print will reaffirm the Fed's hawkish rhetoric and bets for another supersized 75 bps rate hike in November. This will be enough to push the US Treasury bond yields higher and trigger fresh buying around the US dollar.

Conversely, a weaker reading might do little to derail the Fed's aggressive policy tightening path as policymakers want to see a meaningful and sustainable drop in the underlying toward the 2% target. This, along with a further escalation in the Russia-Ukraine conflict, suggests that the path of least resistance for the EUR/USD pair is the downside. Hence, any immediate market reaction to a softer print is likely to be short-lived.

Eren Sengezer offers a brief technical outlook for the pair and writes: “The near-term technical outlook doesn't point to a directional bias with the Relative Strength Index (RSI) indicator on the four-hour chart continuing to move sideways slightly below 50. Additionally, EUR/USD continue to trade near the 20-period SMA, reflecting the pair's indecisiveness.”

Eren also outlines important technical levels to trade the EUR/USD pair: “0.9680 (static level, lower limit of the trading range) aligns as interim support ahead of 0.9650 (static level). With a four-hour close below the latter, EUR/USD could continue to push lower toward 0.9600.”

“On the upside, 0.9720 (Fibonacci 61.8% retracement of the latest uptrend) forms immediate resistance before 0.9760 (100-period SMA) and 0.9780 (Fibonacci 50% retracement),” Eren adds further.

Key Notes

  •   US CPI Preview: High expectations may trigger a dollar-buying opportunity, three scenarios

  •   US September CPI Preview: Monthly core inflation is the figure to watch

  •   EUR/USD Forecast: Euro looks to break out of range on US CPI

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).