When is the US CPI report and how could it affect EUR/USD?

US May CPI Overview

Wednesday's US economic docket highlights the release of the latest consumer inflation figures, due for release later during the early North-American session at 12:30GMT. The headline CPI is anticipated to decelerate further and show a modest month-on-month (m/m) rise of 0.2% in May, down from 0.4% and 0.3% gains recorded in March and April respectively. Meanwhile, the yearly inflation rate is expected to drop to 1.9% as against 2.0% previous and core CPI - excluding food and energy costs, is predicted to rise 0.2% m/m rate as compared to April's 0.1% increase, helping the annual core inflation to hold steady at 2.1%.

However, analysts at TD Securities are looking for the US headline CPI to slow two tenths to 1.8% in May on the back of a mild 0.1% seasonally-adjusted monthly increase and explained: “The softer monthly increase is largely the result of the normalization in energy prices, which were a major driver to the upside in recent months. We anticipate food prices to remain largely subdued in May, but flag an upside risk.”

Deviation impact on EUR/USD

Readers can find FX Street's proprietary deviation impact map of the event below and as observed, the reaction in case of a relative deviation of +0.98 to -0.98 in the core CPI print is likely to be in the range of 26-25 pips during the first 15-minutes and could stretch to 55-71 pips in the following 4-hours.

How could it affect EUR/USD?

Market participants will scrutinize the data for clues over the Fed's near-term monetary policy outlook ahead of the next meeting later this June. Against the backdrop of Friday's disappointing Non-Farm Payrolls data, another miss on the inflation front would further increase bets for an eventual Fed rate cut action in 2019 and exert some additional pressure on the already weaker US Dollar.

Yohay Elam, FXStreet's own Analyst offers important technical levels to watch out for – “1.1348 was the high point on Friday and remains a critical line. A break above it would send EUR/USD to the highest levels since late March. The next cap is at 1.1395 was a swing high back then. It is followed by 1.1445.”

“1.1325 held the pair down in mid-April and is the immediate support line. Next, we find the round number of 1.1300 which supported it on Tuesday, and 1.1285 which supported it earlier. 1.1250 and 1.1220 are next,” he added further.

Key Notes

• US CPI Preview: Heading to irrelevance?
• US inflation outlook: Stable but slightly trending down
• EUR/USD Forecast: Eyeing US inflation and entering overbought conditions

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).