U.S. CPI Could Move EUR/USD One Percent Lower
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The U.S. Consumer Price Index (CPI) print is crucial for FX markets because it serves as a key indicator of inflation, directly influencing interest rate expectations. Generally, when inflation is higher than expected, markets anticipate that the Federal Reserve will raise interest rates to control price stability, leading to a stronger US dollar. Conversely, lower-than-expected inflation can lead to expectations of rate cuts, weakening the dollar. At the moment the market is keenly focused on inflation expectations and with the latest U.S. PCE print (The Fed’s preferred measure of inflation) coming in as expected the biggest move would likely be if the CPI print comes in higher than markets are expecting. That should boost the USD and send the EURUSD over should that happen.
On Thursday, July 11, the latest U.S. CPI print will be released. Seasonax’s event feature is useful for setting expectations and showing historical moves. Over the last 5 years the EUR/USD has seen over 60% of after 2 days following the UC CPI print. The largest fall has been 1.45% on March 2020, but there have been falls of over 1% on numerous occasions. So, a drop in the EURUSD of around 1% would not be an unreasonable expectation should the US CPI print surprise markets with an upside print.
If the US CPI print starts heading back up towards 3.5% then that should be enough to upset the rates markets and send the EURUSD lower.
The major trade risk here is that previous price patterns do not necessarily repeat themselves each time and a weak CPI print should send the USD lower and the EURUSD higher.
Video Length: 00:02:18
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