The Bureau of Labor Statistics (BLS) will release the US CPI data for December on Thursday at 13:30 GMT (21:30 WIB). The high impact of this inflation data could change market views regarding the possibility of a Federal Reserve (Fed) interest rate cut at the end of this year, potentially triggering extreme fluctuations in the value of the US Dollar (USD).

What to anticipate in the next US CPI data report?

Projections for the US Consumer Price Index (CPI) indicate a potential increase in the annual rate of 3.2% in December, slightly faster than the growth of 3.1% recorded in November. Meanwhile, core CPI inflation, which excludes volatile food and energy prices, is expected to decrease to 3.8% during the same period, down from the previous growth of 4.0%.

The monthly CPI and Core CPI are expected to increase by 0.2% and 0.3%, respectively.

Projections for the monthly CPI and Core CPI are increases of 0.2% and 0.3%, respectively. In November, the US CPI data met market expectations, but the report details showed increases in the shelter and used car indexes, countering market expectations of a Federal Reserve rate cut next year.

Used car prices fell by 0.5% in December, according to the monthly Manheim report. TD Securities analysts project a core inflation decline of 0.1% and a main figure increase of 0.2% month-over-month in the December CPI report. Although the Prices Paid Index from the ISM Services and Manufacturing PMI surveys decreased, Fed officials remain data-dependent in their monetary policy stance.

US CPI data holds the key to determining the timing and pace of Fed rate cuts, which could affect the value of the US Dollar. The CME Group FedWatch Tool indicates a 66% chance of a rate cut in March, while Bloomberg’s World Interest Rate Probabilities notes a 5% chance of a rate cut on January 31, rising to nearly 75% by March 20. Analysts at BBH note the sixth rate cut likelihood.

How Does the US Consumer Price Index Report Affect EUR/USD?

Although the annual CPI and Core CPI figures are often discussed, monthly inflation data, especially Core CPI, has significant potential to impact the market.

A monthly inflation figure of 0.3% or higher could prompt investors to reduce speculation about a Fed rate cut in March, supporting the US Dollar. Conversely, a Core CPI figure lower than expected could trigger broad USD selling, as this would align with expectations of a Fed rate cut in the first quarter of 2024.

Asian session analyst at FXStreet, Dhwani Mehta, provides a brief technical analysis for EUR/USD: "The pair is consolidating volatile price movements around the 1.0900 level ahead of the inflation data release on Thursday. The 14-day Relative Strength Index (RSI) indicates uncertainty in the current directional movement."

On the upside, strong resistance is located at the 21-day SMA at 1.0975, above which EUR/USD needs to overcome the psychological level of 1.1000. The next resistance is seen at the January 2 high of 1.1046.

Conversely, a drop below the 50-day SMA at 1.0885 could threaten the horizontal level of the 200-day SMA at 1.0847. Testing the 100-day SMA at 1.0764 becomes likely if the support level above is not maintained.

Read Also:

US CPI Data: November US Inflation Predicted to Decline, Profit Opportunities Narrow?



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The analysis "US CPI Data Soars in December, Inflation Above 3%" is based on insights from fundamental and technical perspectives from trusted sources and is not a recommendation or solicitation. Always remember that this content aims to enrich readers' information. Always conduct independent research regarding other forex information as a reference for your trading.

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