The US consumer price index is scheduled to show high inflation, and to support cautious federal reserves
- The US consumer price index is expected to increase by 2.5 % year on an annual basis in May, at a stronger rate than in April.
- The annual inflation to combat the consumer price index is expected to reach 2.9 %.
- In May, inflation data can affect the expectations of the Federal Reserve Policy, which shakes the US dollar.
The Consumer Prices Index (CPI) is expected to highlight the month of May shed light on inflation in the United States (the United States). Investors will examine the details of the report to see if the new tariff system for the United States Donald Trump enhances prices, which may have significant impacts on Federal Reserve Policy expectations.
The American Labor Statistics Office is scheduled to publish consumer price index data on Wednesday at 12:30 GMT. The direct market reaction can pay the US dollar evaluation (USD).
What do you expect in the following consumer price index report?
It was also measured by a change in the consumer price index, it is expected that inflation in the United States will increase by an annual rate of 2.5 % in May, with a stronger rate than the increase by 2.3 % recorded in April. The basic CPI enlargement, which excludes the categories of food and volatile energy, is expected to increase by 2.9 % on an annual basis, compared to 2.8 % growth in the previous month.
On a monthly basis, the consumer price index and the basic CPI are expected to increase by 0.2 % and 0.3 %, respectively.
The report, TD Securities analysts said: “The basic inflation in the consumer price index will remain unchanged in May, as they published an increase of 0.23 %/m. We expect soft travel services prices to maintain the series, with the start of customs tariffs.”
“It is possible that inflation in the consumer price index has lost the speed, partly due to a significant decline in gas prices. We are doing the pencil in the address and inflation of the basic consumer price index by 2.4 % and 2.9 % on an annual basis, respectively,” they added.
How can the US consumer price index report EUR/USD?
The inflation data for May may affect the market pricing of the FBI expectation and affect the performance of the dollar in the short term. At the Maya Policy meeting, the Federal Reserve kept the federal funds unchanged within 4.25 % to 4.50 %. The comments of federal reserve officials have since highlighted that policy makers are ready to stay patient with regard to the appointment of policies, unless there is a significant contraction in the labor market expectations. “I see more bullish risks to inflation and potential negative risks to employment and production growth,” said Adriana Kogler. Meanwhile, the Federal Reserve Chairman in Chicago, Austan Golsby, indicated that they must wait and know whether the definitions have a major or small impact on inflation before taking a political step.
The latest recruitment report from the United States showed that non -agricultural salary statements increased by 139,000 in May, bypassing market expectations of 130,000. The probability of reducing the CME GROUP Fedwatch rate to reduce the average rate of 25 BPS in July decreased to less than 20 % after this data from about 30 % earlier in the week, indicating that the markets evaluate the labor market as healthy enough to delay its low rates.
The bullish surprise in reading the monthly consumer price index, which is not distorted by the basic influences, can increase from the US dollar with an immediate reaction and weighs on Euro/US dollars because such a reading can feed on the expectations of the FBI to reduce the policy rate only once this year. On the contrary, printing less than 0.2 % in this data may reduce fears that inflation will remain sticky in the second half of the year due to customs tariffs and harm the US dollar. In this scenario, EUR/USD can collect the bullish momentum.
Ern Sengezer, the main analyst of the European session at FXSTREET, introduces a brief artistic look for EUR/USD and explains:
“The RSI Index Index (RSI) on the daily chart exceeds 50 but moves sideways, indicating that the upscale bias remains intact, while it lacks momentum.”
“In the upscale direction, the immediate resistance level is located in 1.1575 (high April 21, mid -point of the four -month -old thunderbolt) before 1.1700 (fixed level, round level) and 1.1860 (upper limit for 1.1250 (Retraded 23.6, a simple average for 20 (SMA) can be at 1.1320. (Fibonacci 38.2 %).
Common questions about inflation
Inflation measures an increase in the price of a representative basket for goods and services. The main inflation is usually expressed as a change in percentage on a month on a monthly (illiterate) basis on an annual (annual) basis. Basic inflation excludes more volatile elements such as food and fuel that can fluctuate due to geopolitical and seasonal factors. The basic inflation is the number that economists focus on and is the level targeted by central banks, which are assigned to maintaining inflation at a controlled level, and is usually about 2 %.
Consumer price index (CPI) measures changing commodity and services basket prices over a period of time. It is usually expressed as changing a percentage on a month basis on a monthly (illiterate) basis and on an annual basis (YOY). Core CPI is the number targeted by central banks as it excludes food and flying fuel inputs. When the basic consumer price index rises above 2 %, it usually leads to high interest rates and vice versa when less than 2 % is less than 2 %. Since high interest rates are positive for the currency, high inflation usually leads to a stronger currency. The opposite is true when the inflation falls.
Although it may seem intuitive, high inflation in a country pays the value of its currency and vice versa to reduce inflation. This is because the central bank usually raises interest rates to combat higher inflation, which attracts more global capital flows from investors looking for a profitable place to enter their money.
In the past, gold was the asset investors turned in times of high inflation because it maintained its value, and while investors will often buy gold for its safe properties in times of extremist turmoil in the market, this is not the case most of the time. This is because when inflation is high, central banks will put interest rates to combat them. The highest interest rates are negative for gold because it increases the costs of maintaining gold in assets that bear interest or placing money in the calculation of cash deposits. On the other hand, low inflation tends to be positive for gold because it leads to low interest rates, making the bright metal a more applicable investment alternative.
