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

US CPI Overview

Wednesday's US economic docket highlights the release of the critical US consumer inflation figures for April, scheduled later during the early North American session at 12:30 GMT. The headline CPI is anticipated to rise by 0.2% during the reported month, down sharply from the 1.2% rise reported in March, suggesting that inflationary pressures in the world's biggest economy are peaking. The yearly rate is also projected to have decelerated from 8.5% in the previous month to 8.1% in April. Core inflation, which excludes food and energy prices, is expected to rise 0.4% MoM and come in at a 6% YoY rate as compared to 0.3% and 6.5%, respectively, in March.

According to Eren Sengezer, Editor at FXStreet: “coronavirus-related restriction measures and lockdowns in China remained in place throughout the month, suggesting that supply-chain challenges are likely to continue to drive prices higher. In the meantime, consumer demand remains healthy in the US. The strong consumer demand combined with higher input and energy prices in the private sector indicates that inflationary pressures are likely to remain high in the next couple of months.”

How Could it Affect EUR/USD?

The markets seem convinced that the US central bank would need to take more drastic action to bring inflation under control. A stronger than expected CPI print would further boost bets for a more aggressive policy tightening by the Fed and push the US bond yields higher, along with the US dollar. Conversely, a softer reading might do little to ease recession fears, which should continue to benefit the greenback's safe-haven status. Apart from this, concerns that the European economy will suffer the most from the Ukraine crisis suggest that the path of least resistance for the EUR/USD pair is to the downside.

Meanwhile, Eren Sengezer offered a brief technical outlook for the EUR/USD pair: “The Relative Strength Index (RSI) indicator on the four-hour chart rose above 50 early Wednesday, pointing to a bullish tilt in the near term. Additionally, EUR/USD continues to trade above the 20 and 50-period SMAs on the same chart, confirming the view that sellers remain on the sidelines.”

Eren also outlined important levels to trade the major: “On the upside, 1.0600 (psychological level, Fibonacci 23.6% retracement of the latest downtrend) aligns as key resistance. With a four-hour close above that level, further recovery gains toward  1.0630 (100-period SMA) and 1.0660 (Fibonacci 38.2% retracement) could be witnessed. Supports are located at 1.0540 (20-period SMA, 50-period SMA), 1.0500 (psychological level and 1.0470 (multi-year low set on April 26).”

Key Notes

  •   US April CPI Preview: Has inflation peaked?

  •   US CPI Preview: Hard core inflation to propel dollar to new highs, and two other scenarios

  •   EUR/USD Forecast: Euro could break out of weekly channel 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 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).