Will the CPI Crash the USD?

Informação não é consultoria em investimentos

This is for informational purposes only and does not contain — or to be considered as containing — investment advice, suggestion, or recommendation for trading.

The most impactful releases of this week will fill the market with volatility and sharp movements.

US CPI

May 10, 15:30 GMT+3

The US Bureau of Labor Statistics will release monthly and annual CPI on Wednesday, May 10, GMT+3. This is a change in the price of goods and services consumers purchase. Markets take these numbers as an inflation gauge, and the US Federal Reserve looks at the reading to adjust the monetary policy. It’s the most important economic data of the last year.

The annual inflation slowed to 5%, which is still way above the target of 2%. The Fed insists on tightening the policy until prices are under control. On the other hand, US Treasury wants a more loose policy due to the increasing pressure on US banks.

The last release was below expectations. EURUSD soared 650 points right after it. 

• Higher-than-expected CPI will push the USD to the sky.
• Otherwise, the USD may slide lower.

BOE Interest Rate

May 11, 14:00 GMT+3

The Bank of England (BOE) will release the change in Official Bank Rate on May 11, 14:00 GMT+3. Simultaneously, the bank will make a Monetary Policy Summary.

It’s among the primary tools the bank uses to communicate with. It contains the outcome of their vote on interest rates and other policy measures, along with commentary about the economic conditions. Most importantly, it discusses the economic outlook and offers clues on the outcome of future votes.

The inflation in the UK is still in the double-digit zone, pressing heavily on the GBP. Therefore, we expect hawkish comments to prevail throughout the Summary. As for the interest rate, investors expect a 25-basis-points hike and a pause after it.

The last rate hike came as expected, creating a two-side volatility swing. 

• Hawkish comments may push the GBP up.
• A pause in hiking will cause a plunge in the GBP.

US Consumer Sentiment

May 12, 17:00 GMT+3

The US University of Michigan will release the Preliminary UoM Consumer Sentiment on Friday, May 12, 17:00 GMT+3. This release is a survey of about 500 consumers which asks respondents to rate the relative level of current and future economic conditions.

Financial confidence is a leading indicator of consumer spending, which accounts for a majority of overall economic activity. The last release exceeded expectations, pushing the EURUSD down by 900 points.

• If the release is above expectations, the USD will rise.
• Otherwise, the USD may fall.

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