Fed watchers await US CPI data on Wednesday

Wednesday will be another active day for global finance, with headline data releases and monetary policy speculation high on the agenda.

European trading is expected to pick up around 08:00 GMT with a report on Italian retail sales. Half an hour later, the United Kingdom will dominate the headlines with data on industrial production, manufacturing production and the goods trade balance. Each figure is expected to show a notable improvement for the month of March.

European Central Bank (ECB) Governor Mario Draghi is set to deliver a speech at 11:00 GMT that could have monetary policy implications. The ECB is gradually unwinding its record stimulus program thanks to a broad pickup in the euro region’s economy.

The US Department of Labor will kick off the North American session with a report on consumer inflation scheduled for 12:30 GMT. The consumer price index (CPI) is expected to have flat-lined in March after climbing 0.2% the month before. In annual terms, however, CPI likely expanded 2.4% from a 2.2% pace.

So-called core inflation, which strips away volatile goods such as food and energy, likely rose 2.1% year-over-year.

Federal Reserve officials target inflation at 2% annually but relies on the core PCE index to gauge changes in consumer prices. That said, the monthly CPI report is seen as a good gauge of long-term inflation trends, which can have a direct impact on Fed policy.

The Fed on Wednesday will release the minutes of the March Federal Open Market Committee (FOMC) meeting, where officials voted to raise interest rates by a quarter point.

Energy traders will also be monitoring weekly inventory data courtesy of the US Energy Information Administration (EIA). Weekly crude stockpiles are forecast to have risen by 220,000 in the latest week.

EUR/USD

Europe’s common currency marched higher on Tuesday, hitting 1.2373 US in intraday trade. At the time of writing, EUR/USD was trading around 1.2360 for a gain of 0.1%. The pair faces stiff resistance at the 1.2370 handle. A breakout from this level would target the recent swing high north of 1.2400.

GBP/USD

Cable extended its multi-day run on Tuesday, as prices once again came close to breaching the 1.4200 level. GBP/USD would later consolidate around 1.4180, where it was last trading. The bulls are finding support above 1.4100 levels, which could see prices extend further into positive territory.

USD/JPY

Improved risk sentiment failed to propel the USD/JPY forward on Tuesday, as the pair touched an intraday low of 106.66. It would later recover north of 107.00, although downside pressure remains the focus. Immediate support is located at the 106.60 swing low region, with upside likely capped by the 107.50 resistance band.