- The US consumer price indicator will augment by 2.7% y / y June, accelerating an augment by 2.4% in May.
- US President Donald Trump still threatens tariffs and undermines the independence of the Fed.
- Data of June inflation will significantly affect the direction of the US dollar, because it is a key indicator for the Fed interest path.
The United States Bureau (USA) Bureau of Labor Statistics (BLS) will publish data on the most crucial consumer price rate (CPI) in June on Tuesday at 12:30 GMT.
Markets will look for fresh signs US President Donald Trump’s Tariffs feeding on prices. Therefore, the American dollar (USD) can experience variability in the CPI edition, because the data has a significant impact on the interest of the Federal Reserve (FED) ratPerspectives this year.
What can you expect in the next CPI data report?
Measured by a change in CPI, The US inflation is expected to augment by 2.7% in JuneAfter recording the augment by 2.4% in May. It is forecasted that the basic CPI inflation, which excludes unstable categories of food and energy, will augment by 3% year -on -year (Yoy), compared to 2.8% acceleration submitted last month. In general, inflation is expected to leave 2% of the Fed target
Within a month, both CPI and the basic CPI are observed by 0.3% in the same period.
In writing the report, the analysts from TD Securities stated: “June Core CPI probably increased to 0.27% of the month of the month (Mom) after a surprising decline from last month to 0.13%. We are looking for prices of goods to gather in June in June, reflecting a certain tariff crossing and reflecting from last month.
“Unlike May, we do not expect the service segment to facilitate balance this force. The headline probably also increased by 0.27%, supported by energy prices,” they added.
How can the American consumer price index report affect EUR/USD?
Entering the US inflation on Tuesday, Markets digest a lot of fresh tariff threats President Trump so far this month.
At the weekend, Trump threatened a 30% tariff for imports from the European Union (EU) and Mexico, from August 1, after sending tariff letters to about 20 other countries last week.
Meanwhile, Trump exerts political pressure on a more aggressive stimulus from the American Central Bank, undermining its independence. The president continued to fight the chairman of the Fed Jerome Powell, saying on Sunday that “it would be great if Powell gave way.”
Economic advisor to the White House Kevin Hassett warned Trump at the weekend may have grounds for Powell’s release due to exceeding the renovation costs at the FED headquarters in Washington.
Against this background, markets continue to quote in just over 50 base points (BPS), interest rate reduction this year, with the participation of Powell sticks to the patient’s prospects in the cuts.
According to the CME Fedwatch tool, Fedwatch tools, the chances of reduction of the FED rate is currently about 60%, compared to 65% at the beginning of the month.
. Increased expectations regarding the extended break by the Fed result mainly from the latest tariff salvo from Trump and a resistant American labor market.
Data from work in June USA showed that non -farmed wages (NFP) increased by 147,000, compared to the expectations of 110,000 jobs. Meanwhile, the unemployment rate dropped lower to 4.1% last month compared to 4.2% in May.
This is why, The inflation report from June is crucial for the market price assessment of the Fed rate perspectivesIn turn, it affects USD valuation in the near future.
An additional surprise in the monthly CPI reading, which is not distorted by the basic effects, can provide an additional leg for recovery of USD and weigh EUR/USD. In this case, the data can revive the expectations of only one Fed rate reduction this year.
However, more softer than the expected monthly basic inflation can alleviate the fears of the impact of the tariff on inflation, undermining USD demand. In this scenario, EUR/USD can regain stubborn adhesion.
Dhwani Mehta, the main analyst of the Asian session in FxStreet, offers short technical forecasts for EUR/USD and explains:
“The couple fights with 21-day straightforward movement support (SMA) at 1.1665. Meanwhile, the 14-day relative strength (RSI) indicator persists far above 50, despite the recent decline, which suggests that the stubborn potential remains unparthed.”
“In advance, the level of immediate resistance is aligned with the psychological sign 1.1750, above which the level of the round will be tested.
The price of the euro this year
The table below shows the percentage change in the euro (EUR) compared to the main currencies this year. The euro was the strongest in relation to the American dollar.
| USD | EUR | GBP | JPy | BOOR | Aud | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -11,41% | -7.11% | -6.41% | -4.94% | -5.76% | -6.64% | -12.20% | |
| EUR | 11.41% | 4.82% | 5.64% | 7.29% | 6.31% | 5.38% | -0.89% | |
| GBP | 7.11% | -4.82% | 0.79% | 2.37% | 1.42% | 0.53% | -5.46% | |
| JPy | 6.41% | -5.64% | -0.79% | 1.57% | 0.69% | -0.22% | -6,15% | |
| BOOR | 4.94% | -7.29% | -2.37% | -1.57% | -0.98% | -1.80% | -7.66% | |
| Aud | 5.76% | -6.31% | -1.42% | -0.69% | 0.98% | -0.87% | -6.77% | |
| NZD | 6.64% | -5.38% | -0.53% | 0.22% | 1.80% | 0.87% | -5.96% | |
| CHF | 12.20% | 0.89% | 5.46% | 6.15% | 7.66% | 6.77% | 5.96% |
The heat map shows percentage changes in the main currencies towards each other. The basic currency is collected from the left, and the quote currency is collected from the upper order. For example, if you choose the euro on the left column and go along the horizontal line to the American dollar, the percentage shift displayed in the field will represent the EUR (base)/USD (quote).
Frequently asked inflation questions
Inflation measures the augment in the price of a representative basket of goods and services. Header inflation is usually expressed as a percentage change based on month to month (Mom) and year on year (Yoy). Basic inflation excludes more unstable elements such as food and fuel, which can change because of geopolitical and seasonal factors. Basic inflation is the number of economists focus on the level of central banks, which are authorized to maintain inflation at a management level, usually about 2%.
The consumer price indicator (CPI) measures the change in the prices of the basket of goods and services over time. This is usually expressed as a percentage change on the basis of month to month (Mom) and year on year (Yoy). Core CPI is a number directed by central banks because it excludes unstable food and fuel cartridges. When Core CPI increases above 2%, it usually causes higher interest rates and vice versa when it drops below 2%. Because higher interest rates are positive for currency, higher inflation usually causes a stronger currency. On the contrary, it is true when inflation falls.
Although this may seem contrary to intuition, high inflation in the country increases the value of its currency and vice versa for lower inflation. This is due to the fact that the central bank usually raises interest rates to combat higher inflation, which attracts more global influx of capital than investors looking for a lucrative place to park their money.
Earlier, gold was investors of assets, to which he turned to high inflation, because it retained its value, and although investors often buy gold for his unthreatening real estate in times of extreme market riots, this is not the most of the time. This is because when inflation is high, central banks set interest rates to combat it. Higher interest rates are negative in the case of gold because they augment the costs of having gold in relation to assets on interest or place money on the cash deposit account. On the other hand, lower inflation is positive for gold because it lowers interest rates, thanks to which radiant metal is a more profitable investment alternative.
