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

US CPI Overview

Wednesday's US economic docket highlights the release of the US consumer inflation figures for February, scheduled later during the early North American session at 13:30 GMT. The headline CPI is expected to rise by 0.4% during the reported month, enough to push the yearly rate to 1.7% from the 1.4% recorded in January. Meanwhile, the core CPI (excluding energy and food costs) is anticipated to have risen 0.2% MoM in January and 1.4% on yearly basis.

As Joseph Trevisani, senior analyst at FXStreet explains: “Central bank liquidity, government deficits, stimulus checks and consumers liberated from their pandemic shackles may be stoking the strongest US price gains since the financial crisis of over a decade ago. The recent sharp price increases in the production pipeline will be passed along to distributors and then to retailers. When these gains are combined with vaulting consumer demand it may give retailers something that have not had since before the 2008 recession--pricing power.”

How Could it Affect EUR/USD?

Investors remain optimistic that the successful COVID-19 vaccine rollouts and massive US fiscal spending will lead to a powerful rebound in the US economy. This, in turn, has been fueling speculations for a possible uptick in the US inflation and raised doubts that the Fed would retain ultra-low interest rates for a longer period.

A spike in US inflation will reaffirm a strong consumer demand and continue pushing the US bond yields higher. This, in turn, could again unsettle the markets and provide a fresh lift to the US dollar, prompt some fresh selling around the EUR/USD pair.

Conversely, the impact of a softer reading may not be seen immediately as market participants are likely to wait for a critical ten-year bond-auction in the US.

Meanwhile, Yohay Elam, FXStreet's own Analyst offered a brief technical outlook for the EUR/USD pair: “Euro/dollar is suffering from downside momentum on the four-hour chart and trades below the 50, 100 and 200 Simple Moving Averages. Moreover, the Relative Strength Index has risen above the 30 level – exiting oversold conditions.”

Yohay also provided important technical levels to trade the major: “Support awaits at the daily low of 1.1868, followed by the 2021 trough of 1.1836. A weak cushion awaits at 1.1815, with stronger support at 1.18 – a psychologically significant level, followed by 1.1750. All were in play in late 2020. Some resistance is at the daily high of 1.1902, followed by 1.1915, Tuesday's high point. It is followed by 1.1950 and 1.1990.”

Key Notes

  •  US CPI February Preview: A perfect storm in the making?

  •  US CPI: Fed unlikely to be concerned by rising inflation – ING

  •  EUR/USD Forecast: Bears target 1.18 as bond auction may trigger fresh dollar strength

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).