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

US CPI Overview

Tuesday's US economic docket highlights the release of the critical US consumer inflation figures for March, scheduled later during the early North American session at 12:30 GMT. The headline CPI is anticipated to rise by 1.2% during the reported month as compared to the 0.8% in February. The yearly rate is projected to accelerate to 8.4% in March from 7.9% in the previous month. Meanwhile, core inflation, which excludes food and energy prices, is anticipated to come in at a 6.6% YoY rate, up from the 6.4% in February.

Analysts at RBC Economics offered a brief preview of the report and explained: “March US CPI data will reinforce those inflation concerns with the headline rate likely to increase to the 8.3% range, driven by skyrocketing gasoline prices following the Russian invasion of Ukraine. But gas isn’t the only thing to see faster YoY price growth. And pressures are broadening as strong consumer demand bumps up against production capacity limits and extremely tight labour markets.”

How Could it Affect EUR/USD?

The markets seem convinced that the Fed would adopt a more aggressive policy response to combat high inflation and have been pricing in a 50 bps rate hike move over the next two meetings. A stronger than expected CPI print would further boost bets and push the US bond yields higher, along with the US dollar. Conversely, a softer reading – though seems unlikely – might do little to calm market fears about a faster policy tightening by the Fed or prompt any meaningful selling around the buck. This, in turn, suggests that the path of least resistance for the EUR/USD pair is to the downside, though a more hawkish ECB last week should help limit deeper losses.

Eren Sengezer, Editor at FXStreet, outlined important levels to trade the EUR/USD pair: “1.0860 aligns as key support for EUR/USD. Although the pair dropped below this level last week and early Tuesday, it failed to make a four-hour close below it. If this support fails, 1.0835 (April 8 low) could be seen as interim support ahead of 1.0800 (psychological level).”

“On the upside, 1.0900 (psychological level) forms the first hurdle before 1.0940 (Fibonacci 23.6% retracement of the latest downtrend, 50-period SMA on the four-hour chart) and 1.0980 (Fibonacci 38.2% retracement, 100-period SMA),” Eren added further.

Key Notes

  •   US Consumer Price Index March Preview: Federal Reserve policy affirmed

  •   US CPI Preview: Forecasts from 12 major banks, another lurch forward

  •   EUR/USD Forecast: Euro stays vulnerable, tests key support

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 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).