- CPI data for April will be released on 15 May. Economists expect overall inflation to fall to 3.4% and core inflation—to 3.7% by the end of April.
- The cooling impulse in US inflation seen for much of last year has come to a halt.
- The dollar is still strong this week, the week of the publication of US inflation data—the main target for EUR/USD is 1.0720–1.0730 or lower.
The US Bureau of Labor Statistics will release the Consumer Price Index (CPI) report on Wednesday, 15 May.
The previous four US inflation reports have been worse than expected, and the last one was particularly bad: annual consumer inflation was 3.5% in March, the highest level in six months. Some of this was due to higher fuel prices, but even core inflation, which excludes volatile food and energy, failed to meet expectations for a slowdown and remained at 3.8%. According to surveys, economists expect overall inflation to fall to 3.4% by the end of April, while core inflation will be 3.7%
"Two chances are possible at the time the report is published, and both are unpleasant. If the forecast is justified, it will indicate rather modest steps in the right direction. In case the indicators deteriorate, the picture will become even more unfavorable," said Kar Yong Ang, the Octa broker's financial market analyst. "The upshot is that in both cases, we see that the cooling impulse in inflation that we saw for much of last year has come to a halt," he added.
With continued weak inflation data, the US dollar still has more strength against other currencies. In addition, from a technical point of view, the dollar index may strengthen. For currency market participants, this means that EUR/USD may keep declining in the week of US inflation data publication, with a target of 1.0720–1.0730 or lower.