USD: Inflation focus into CPI release – TD Securities

TD Securities’ Global Strategy Team highlights that United States (US) Consumer Price Index (CPI) is the key event, with core inflation expected to rise 0.27% m/m and headline CPI to jump 0.90% m/m as higher Oil prices feed through. They note markets may look through any temporary weakness, while a stronger print could intensify inflation concerns and shape US Dollar (USD) expectations.

US CPI and PCE shape Dollar outlook

"On Friday, all focus continues to be on the Middle East, but CPI will also grab attention in the morning. We expect a core print of 0.27% m/m while headline is likely to see some of the oil pricing pass-through at a whopping 0.9% m/m. Markets are likely to look through any weakness, betting on higher inflation in April if the print comes in weaker, while a stronger print could exacerbate inflation concerns."

"We look for core inflation to pick up to 0.27% m/m in March, largely owing to rising momentum in goods prices as tariff pass-through lingers. Services inflation likely remained steady vs February owing to a rebound in shelter prices. The focus will be on any evidence that the anticipated sharp rise in prices for the energy basket is filtering to the core segment in March."

"We expect headline CPI jumped 0.90% m/m, with the energy component explaining most of the surge. Food inflation likely gave back momentum, cooling to 0.17% m/m. We see the risks to our forecasts skewed to the upside vs our below-consensus projection for core CPI inflation."

"PCE prices came in line with market expectations with 0.37% m/m for the core and 0.38% for the headline. This February data is largely stale as it reflects pre-Iran inflation conditions. The strong number largely reflects continued tariff passthrough with a strong core goods number at 0.8% m/m."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)