Forexlive European FX news wrap: Awaiting the US CPI release | Forexlive
It’s been a pretty calm session with limited data and newsflow. Everyone’s awaiting the US CPI release due in roughly an hour. Given the
resilient labour market data, even if we get soft figures, the Fed won’t
cut in July at this point. The market will likely increase the rate cut
bets from September onwards though and weigh on the US dollar, while
keeping risk assets supperted.
Higher than
expected figures is what could trigger the biggest reaction. While one
data point doesn’t make a trend, the market will likely assign more risk
premium on the inflation view and even if the interest rates pricing
might remain the same, we could see some corrections in asset prices
with US dollar likely supported, while risk trades undergoing some
‘profit taking’.
Worth to highlight that we have some strong consensus in the 2.9-3.0% range for the Core Y/Y figure and the 0.2-0.3% for the Core M/M measure. If we get deviations from those figures, the market will likely react in a big way. We have also the Canadian CPI coming up, but it will most likely be eclipsed by the US CPI release.
Looking at the data and news released during the session, the German ZEW improved further as optimism remains high amid easing trade war fears, ECB rate cuts and expansionary fiscal measures. On the US-EU trade front, talks are ongoing and the tones remain positive with nothing to worry about yet.
Finally, we got some comments from the US Treasury Secretary Bessent late in the session where he just highlighted that Trump has no intention to fire Powell and that he wouldn’t put too much weight on today’s CPI figure because it’s the trend that matters more. A hint that the CPI might be higher than expected? Who knows. In my opinion, it’s always better to wait for the actual release.
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