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11:27 AM · 13 September 2022

📢EURUSD gains 0.6% ahead of US CPI

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EURUSD gains 0.6% ahead of US CPI data release for August. However, it should be said that gains on the main currency pair are driven primarily by EUR strength, resulting from hawkish comments from ECB members and a drop in European energy prices. European gas prices dropped below €200/MWh amid expectations of EU capping energy prices at €180-200/MWh.

When it comes to US inflation data for August, the market expects a deceleration in headline CPI from 8.5% to 8.1% YoY, mostly because of lower fuel prices. Energy prices contributed 2.4% in the latest reading. Meanwhile, core gauge is expected to increase from 5.9 to 6.1% YoY due to an increase in rental prices.

Contributions to US inflation. Source: Bloomberg

Today's inflation reading is unlikely to change Fed plans for a meeting next week (another +75 bp expected). However, a noticeable drop in inflation could boost odds for a 'Fed pivot'. However, a halt to increases in core gauge would be needed.

EURUSD approaches the 1.02 mark ahead of US CPI inflation release. While reading is unlikely to change Fed's plans, a drop below 8% could provide more fuel for EURUSD rally. Should core inflation surprise to the upside, a pullback below 1.01 cannot be ruled out. Source: xStation5

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