US500 slightly down ahead of US CPI report 📉

US500 drops 0.3% before CPI report release scheduled at 12:30 PM GMT🗽

Today’s CPI data from the United States, published at 2:30 PM, is this week’s most important macroeconomic report.
Before the release, the dollar and Wall Street indices are slightly lower, although the slowdown comes after a strong rebound in U.S. assets. The market will focus on whether the April report signals a rise in inflation or if it avoids triggering concerns about an "inflation effect" stemming from the new U.S. administration’s trade policy turmoil.

• A scenario of higher CPI inflation in the U.S. could increase the likelihood of a correction in U.S. assets. Conversely, if inflation falls or aligns with forecasts, it could strengthen expectations for rate cuts by the Fed and support stock indices, which, following the U.S.–China agreement, have nearly treated the trade war as a closed chapter.
• This CPI reading will offer the first real insight into the impact of Donald Trump's tariff policies on U.S. consumers. The retaliatory tariffs announced on April 2 shook financial markets and heightened uncertainty over the U.S. economic outlook — especially in terms of pricing behavior.
• At the same time, it’s worth noting that the market is increasingly leaning toward an interest rate cut by the Fed. However, one factor that could delay such a decision is a potential strengthening of inflation in the U.S.
• Today’s CPI release will shed light on several critical investor concerns and may shake up forecasts related to the Fed’s monetary policy.  It could trigger short-term movements in the U.S. dollar, Treasury yields, and equity markets.

Market Expectations

• CPI (m/m): 0.3% (previous: -0.1%)

• Core CPI (m/m): 0.3% (previous: 0.1%)

• CPI (y/y): 2.4% (previous: 2.4%)

• Core CPI (y/y): 2.8% (previous: 2.8%)

Focus will be on the monthly dynamics, where a rise is expected due to the newly implemented (and still active) tariffs.
Although Trump has currently suspended some of the duties — including yesterday’s 90-day pause on the 145% tariffs on Chinese goods — temporary retaliatory tariffs and the still-effective general 10% tariffs could disrupt disinflation trends in import-sensitive categories like vehicles, furniture, and home goods.

The previous CPI release was lower than expected (2.4% vs. 2.8% in March), contrasting with concerns over renewed inflationary pressure due to tariffs and the Fed's emphasized uncertainty around their long-term impact on price dynamics. However, that data reflected a period before the “10% tariffs on everything” were introduced — hence, the market largely ignored it.

In March, energy prices fell 3.3% y/y (the steepest drop since October 2024), mainly due to seasonal volatility and demand concerns. There was also relief from declining rent inflation, which accounts for around one-third of the CPI basket.

What to expect?

Given April’s decline in inflation, the median forecast cautiously suggests CPI will remain at 2.4% y/y. The reading would need to deviate significantly from expectations to trigger notable market volatility. However, the monthly figure is gaining importance — investors will be looking for early signs of the impact from the 10% broad-based tariffs. Here, the market expects the first monthly increase in 2025, projected at 0.3%.

Inflation could be pushed higher by rising car prices and — somewhat unexpectedly — fuel prices at U.S. gas stations.

(Source: XTB Research, Bloomberg Finance L.P.)

However, declining rent inflation will likely cushion the impact of those categories.

(Source: XTB Research, Bloomberg Finance L.P.

Over the past week, market-implied probability of a July Fed rate cut has dropped significantly. Just last week, markets were pricing in one full cut — now, that probability is down to around 40%. If the CPI reading is significantly above expectations, and if components unrelated to tariffs show higher upward pressure, the market may further reduce expectations of a cut — potentially boosting Treasury yields. Here are the market forecasts for future Fed rate cuts.

(Source: Bloomberg Finance L.P.)

In the U.S. bond market, 10-year yields are climbing again after dropping sharply during last week’s panic over retaliatory tariffs. Now, with a renewed appetite for riskier assets and a downward revision in expectations for Fed easing, yields have surged back toward 4.45%.

Source: XTB Research, Macrobond

US500 Chart (D1 and H1)

S&P 500 futures have rebounded above the 200-day EMA, and since early April, we’ve seen a V-shaped recovery — reminiscent of patterns from 2018 and 2020. The RSI at 63 still shows no signs of overheating.

Source: xStation5

On the hourly chart, US500 has broken above the 71.6% Fibonacci retracement of the February downturn. Still, this remains a potentially important resistance zone, as indicated by price action in late March — where the 5,850-point level previously triggered a downward impulse.

Source: xStation5