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

Haresh Menghani FXStreet

US CPI Overview

Wednesday's US economic docket highlights the release of the critical US consumer inflation figures for July, scheduled later during the early North American session at 12:30 GMT. The headline CPI is expected to decelerate to 0.5% during the reported month from the 0.9% increase recorded in June. The yearly rate is also anticipated to have edged lower to 5.3% in July from 5.4% previous, which was the biggest monthly gain since August 2008. Core inflation, which excludes food and energy prices, is projected to rise 4.3% in July from a year ago against the 4.5% jump in the previous month – the fastest pace of increase since September 1991.

How Could it Affect EUR/USD?

Friday's blockbuster US NFP report marked another step towards the Fed's goal of substantial further progress in the labour market recovery. A stronger inflation print – the second leg of the Fed's dual mandate – will reaffirm market expectations that the US central bank will begin scaling back its extraordinary monetary stimulus sooner rather than later. This should continue to act as a tailwind for the US dollar and pave the way for a further near-term depreciating move for the EUR/USD pair.

Conversely, a softer reading might force investors to push back the likely timing for policy tightening by the Fed. That said, worries about the potential economic fallout from the fast-spreading Delta variant of the coronavirus might continue to lend some support to the safe-haven greenback. This, in turn, suggests that the path of least resistance for the EUR/USD pair remains to the downside.

Key Notes

• US July CPI Preview: Inflation data unlikely to change Fed tapering expectations

• US CPI Preview: Forecasts from nine major banks, annual inflation to decline slightly in July

• EUR/USD Outlook: Bears await a sustained break below 1.1700 mark, US CPI eyed

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).

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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