US CPI Preview: An upside surprise will add further impetus for the Dollar over the short-term – MUFG

FXStreet Insights Team FXStreet

Today brings the top of the top-tier data from the US – the Consumer Price Index (CPI) report. An upside surprise could provide support to the Dollar, economists at MUFG Bank report.

Momentum favouring the US Dollar at the moment

“An upside surprise today may still not shift the dial too much. Certainly, if there are upside surprises in more volatile components today, the reaction may be more muted than in previous CPI overshoots. Nonetheless, there must be a risk of a further liquidation of stale EUR/USD long positions.”

“The upward momentum has faded and the compelling ECB/Fed divergence trade is well priced and not as compelling following recent data flow. Risks in that regard feel more to the downside. So with the momentum favouring the US Dollar at the moment an upside surprise will add further impetus for the Dollar over the short-term.”

“With another CPI print before the FOMC meeting in June, it would probably take a large 0.2ppt upside surprise or more to see a rates and FX move that is sustained and meaningful in size.”

See – US CPI: Banks Preview, hot inflation still the norm

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

Editor's Picks

EUR/USD drops to daily lows near 1.1630

EUR/USD now loses some traction and slips back to the area of daily lows around 1.1630 on the back of a mild bounce in the US Dollar. Fresh US data, including the September PCE inflation numbers and the latest read on December consumer sentiment, didn’t really move the needle, so the pair is still on course to finish the week with a respectable gain.

GBP/USD trims gains, recedes toward 1.3320

GBP/USD is struggling to keep its daily advance, coming under fresh pressure and retreating to the 1.3320 zone following a mild bullish attempt in the Greenback. Even though US consumer sentiment surprised to the upside, the US Dollar isn’t getting much love, as traders are far more interested in what the Fed will say next week.

Gold makes a U-turn, back to $4,200

Gold is now losing the grip and receding to the key $4,200 region per troy ounce following some signs of life in the Greenback and a marked bounce in US Treasury yields across the board. The positive outlook for the precious metal, however, remains underpinned by steady bets for extra easing by the Fed.