💲USD weakens ahead of the inflation data

Today at 1:30 pm BST the US CPI inflation data will be released. Another 40-year record is expected with a reading of 7.3% y / y. The previous inflation reading was 7.0%. Core inflation is also expected to rise strongly to 5.9% y / y from 5.5% y / y. Inflation at such levels should only cement the Fed's decision to start tightening monetary policy.

On the other hand, there were signs that inflation may slightly disappoint compared to expectations. A large part of Bloomberg's best forecasters indicate that core inflation will fall to 0.4% MoM, compared to market consensus at 0.5% MoM. Many analysts also point out that the EURUSD pair was gaining on average after inflation readings over the past 12 months, regardless of the direction and scale of the surprise.

EURUSD remains in short-term consolidation. A break above 1.1440 should lead to a re-test of the last local highs, which could potentially negate a double top formation. On the other hand, if EURUSD breaks below 1.1400 it could open the way towards 1.1250. It is also worth observing the behavior of bond yields, and in our case, TNOTE prices. Source: xStation5

The reaction of EURUSD to the previous readings was mostly positive. In January and December, the EURUSD rose after the CPI readings. On the other hand, in November and October, when the readings significantly exceeded the consensus, the EURUSD pair fell, although the downward move was much smaller compared to previously indicated upward moves. Source: Bloomberg