US CPI expected to drop again
Ahead of the US decision on interest rates on Wednesday, today sees the latest US inflation data which is expected to see the headline rate fall to 4.1% year-on-year, down from a 4.9% rise the previous month.
This would be the weakest CPI growth since March 2021. However, watch the core reading. It is forecast to fall too, but not as much, to 5.3% YoY, from 5.5% in April, which represents an inversion of the two key measurements of consumer prices.
(Video Transcript)
US CPI
Ahead of the US interest rate decision from the Federal Reserve (Fed) on Wednesday on US rates, the market's preparing for the latest US inflation data due at 1:30 PM today, UK time.
The consumer price index (CPI) is expected to fall to 4.1% year-on-year (YoY), following a 4.9% rise in the previous month. This will be the weakest CPI growth since March 2021. This is the headline rate. Now more than the headline inflation rate, the focus will beyond core CPI. This is excluding food and fuel. It's forecast to fall too, but not by as much to 5.3% YoY from 5.5% in April, which represents an inversion of the two key measurements of consumer prices.
Now since March, the headline CPI figure points below that core CPI with that really unusual inversion. Energy prices have fallen substantially, but broad-based inflation seems to be stickier than thought.
USD basket
Quick update on where we are in terms of the USD basket. We're now trading pretty much close to levels not seen since the 23rd of May, so near two-week lows for the dollar basket.
EUR/USD
An update on what's happening with euro/dollar trade. This bounce away from the 76.4% exacerbated today. This is the highest print we've seen there since the 23rd of May. If you're long on the US data going into these numbers today, your stock goes underneath the 61.8% and retracement lines, your stop at around about the 107 level, if you're long at 10795, which is where we're trading at the moment for the EUR/USD.
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