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

By FXStreet Data due for release within a hour from now is expected to show US economy exited deflation in March.

CPI is seen rising 0.2% m/m and 1.2% y/y as compared to the previous month’s print of -0.2% and 1.0% respectively. Core CPI, which excludes volatile food and energy component, is seen coming-in at 0.2% m/m and 2.3% y/y.

EUR/USD is heading into the data release on a weak footing. The pair breached a week long support zone of 1.1330-1.1340 yesterday and extended weakness to 1.1234 levels before recovering slightly to trade around 1.1260 levels.

Strong CPI could weigh over EUR/USD

Dollar’s rebound was triggered by hawkish comments from Fed’s Harker and Kaplan, who said faster rate hikes are likely if inflation rises aggressively. In light of these comments, a strong CPI – headline and core figure – could help USD extend gains across the board, pushing the pair well below 1.1236 (38.2% of 1.0463-1.0517).

On the contrary, a weaker-than-expected inflation, especially core figure could strengthen market’s belief that Fed is unlikely to raise rates anytime soon and thus help EUR/USD have a relook at 1.1330-1.1340 levels.

Weekly initial jobless claims could also come into play, although markets could look through …read more

Source:: FX Street