US CPI preview: What to expect of EUR/USD?

By FXStreet FXStreet (Mumbai) – The EUR/USD pair has surrendered gains to trade largely unchanged around 1.0900 levels ahead of the US CPI data release.

CPI seen stagnating, minor risk of deflation

The CPI is expected to have stagnated in December, unchanged from November’s reading. The headline CPI figure could print in the negative territory as the oil prices fell sharply in December. Furthermore, strong USD could have added to the disinflationary pressures. However, both the factors are well known, hence the core CPI is likely to take center stage today.

The core CPI excluding food and energy costs is likely to increase to 2.1% year on year, marking the fastest pace of rise since July 2012. An uptick in the core CPI would add credence to Fed’s view that inflation is likely to hit the target of 2% and may result in the USD rally. On the other hand, a weaker CPI could trigger a correction in the USD.

The CPI’s impact on the EUR/USD also depends on the US index futures’ reaction to the data. The data may not receive attention from the markets if the index futures indicate serious risk aversion on the Wall Street.

EUR/USD Technical Levels

The immediate …read more

Source:: FX Street