- The US Consumer Price Index is forecast to rise 2.9% YoY in February.
- The core CPI inflation is seen a tad lower at 3.2% last month.
- The inflation data could impact the US Dollar’s value and the Fed’s cautious policy stance.
The United States (US) Bureau of Labor Statistics (BLS) is set to publish the high-impact Consumer Price Index (CPI) inflation report for February on Wednesday at 12:30 GMT.
The CPI figures could notably impact the US Dollar (USD) and the Federal Reserve’s (Fed) cautious monetary policy stance.
What to expect in the next CPI data report?
As measured by CPI, inflation in the US is set to rise at an annual pace of 2.9% in February, down slightly from 3.0% reported in January. Core CPI inflation, which excludes the volatile food and energy categories, is expected to ease to 3.2% in the same period from a year earlier, compared to a 3.3% growth in January.
On a monthly basis, a 0.3% increase is projected for the headline CPI and the core CPI inflation figures.
Previewing the report, analysts at TD Securities noted: “We expect core CPI inflation to cool down in February following the January jump to 0.45%, as price resets came in firmer than expected in the services segment. We look for slowing in both the goods and services segments, with owners’ equivalent rent (OER) inflation dropping to a 3-month low.”
“On a year-over-year (YoY) basis, headline and core CPI inflation are likely to drop by a tenth each to 2.9% and 3.2%, respectively,” TDS analysts said.
How could the US Consumer Price Index report affect EUR/USD?
Against mounting US economic slowdown concerns and President Donald Trump-led global tariff war, markets are now pricing in 85 basis points (bps) of easing from the Fed this year, compared to 75 bps on Monday, per the LSEG Fed interest rate probabilities.
The recent slew of US data releases has been quite discouraging, especially with the February Nonfarm Payrolls (NFP) report on Friday showing that the US economy added 151,000 jobs in February, compared with an expected rise of 160,000 and a previous downward revision of 125,000. The Unemployment Rate climbed to 4.1% versus expectations of 4%. The Labor Force Participation Rate ticked a tad lower to 62.4% in the same period from January’s 62.6%.
On the other hand, Fed Chair Jerome Powell stated on Friday that the US central bank would take a cautious approach to monetary policy easing, adding that the economy currently “continues to be in a good place”.
Therefore, stakes are high heading into the US CPI showdown as the inflation report could shed fresh light on the direction of the Fed’s interest rates and the USD.
A bigger-than-expected cooldown in the annual headline and core inflation prints could shake off concerns over risks to the disinflation path, compelling Fed to resume rate cuts while exacerbating the Greenback’s pain.
Conversely, the US dollar would find renewed demand if the US CPI data surprises the upside. This scenario would justify the Fed’s prudence on inflation and policy outlooks, reviving hawkish Fed expectations.
Dhwani Mehta, Asian Session Lead Analyst at FXStreet, offers a brief technical outlook for EUR/USD and explains: “EUR/USD’s near-term technical picture points to a likely buyer exhaustion as the Relative Strength Index (RSI) indicator on the daily chart sits within the overbought territory above 70. However, any pullback could be quickly bought into as a 21-day Simple Moving Average (SMA) and 100-day SMA Bull Cross remains in play.”
“EUR/USD needs acceptance above the November 6 2024 high of 1.0937 to extend the uptrend toward the 1.1000 psychological level. The next relevant bullish targe is seen at the 1.1050 mark. Conversely, the immediate support is at the 200-day SMA at 1.0721, below which the March 5 low of 1.0602 will be tested. The 21-day SMA at 1.0546 will be buyers’ last defence.”
Euro PRICE Last 7 days
The table below shows the percentage change of Euro (EUR) against listed major currencies last 7 days. Euro was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -3.98% | -1.86% | -1.39% | -0.64% | -1.14% | -1.64% | -1.78% | |
| EUR | 3.98% | 2.21% | 2.70% | 3.48% | 2.96% | 2.43% | 2.28% | |
| GBP | 1.86% | -2.21% | 0.50% | 1.24% | 0.74% | 0.21% | 0.08% | |
| JPY | 1.39% | -2.70% | -0.50% | 0.76% | 0.25% | -0.27% | -0.39% | |
| CAD | 0.64% | -3.48% | -1.24% | -0.76% | -0.50% | -1.01% | -1.15% | |
| AUD | 1.14% | -2.96% | -0.74% | -0.25% | 0.50% | -0.52% | -0.66% | |
| NZD | 1.64% | -2.43% | -0.21% | 0.27% | 1.01% | 0.52% | -0.13% | |
| CHF | 1.78% | -2.28% | -0.08% | 0.39% | 1.15% | 0.66% | 0.13% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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