EURUSD trades around 60 pips above parity and the dollar is generally oversold ahead of the CPI release
US CPI inflation for June data will be released today at 1:30 pm BST. The expectations point to a higher reading of 8.8% y / y compared to previous reading of 8.6% y / y. In turn, core inflation is to drop slightly to 5.7% y / y from 6.0% y / y. Today's inflation reading will give us more hints in what to expect from the Federal Reserve's July decision. There have been several indications of a slowdown in inflation recently, but it seems the Fed, in order to remain credible, will want to demonstrate that it will fight inflation until it sees clear signs that price pressure is retreating.
When it comes to the inflation reading, the most important thing is the costs of services. Along with rising raw material prices and tensions in the supply chain, the prices of almost all products rise sharply. As you can see, recently we have seen slight declines in contribution from goods, which results from the decline in commodity prices. On the other hand, energy continues to drive up inflation and the situation does not seem to change any time soon. Source: Bloomberg
Start investing today or test a free demo
Create account Try a demo Download mobile app Download mobile appInflation expectations are quite balanced. The vast majority of analysts see inflation at 8.8%, and the highest forecast is 8.9%. The lowest was 8.1%. Therefore, the dollar could strengthen if inflation broke the level of 9.0%, which could lead to an increase in interest rates by 100 bp. On the other hand, a smaller hike of around 50 bp could be possible if inflation fell to around 8%, which seems unlikely at the moment.

EURUSD is trading around 60 pips above parity. Range of the largest correction in the trend in the last two weeks indicates that a key resistance is located around 1.0110. However, to achieve this level, the CPI would have to fall sharply towards 8% level. In turn, breaking the parity could be possible with inflation reading above 9%. Source: xStation5
The content of this report has been created by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, (KRS number 0000217580) and supervised by Polish Supervision Authority ( No. DDM-M-4021-57-1/2005). This material is a marketing communication within the meaning of Art. 24 (3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II). Marketing communication is not an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulation (EU) 2016/958 of 9 March 2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest or any other advice, including in the area of investment advisory, within the meaning of the Trading in Financial Instruments Act of 29 July 2005 (i.e. Journal of Laws 2019, item 875, as amended). The marketing communication is prepared with the highest diligence, objectivity, presents the facts known to the author on the date of preparation and is devoid of any evaluation elements. The marketing communication is prepared without considering the client’s needs, his individual financial situation and does not present any investment strategy in any way. The marketing communication does not constitute an offer of sale, offering, subscription, invitation to purchase, advertisement or promotion of any financial instruments. XTB S.A. is not liable for any client’s actions or omissions, in particular for the acquisition or disposal of financial instruments, undertaken on the basis of the information contained in this marketing communication. In the event that the marketing communication contains any information about any results regarding the financial instruments indicated therein, these do not constitute any guarantee or forecast regarding the future results.