EUR/USD: Magnifying glass on US CPIs

(News Bulletin 247) – More than ever, the US inflation figures will be scrutinized, and their deviation from the consensus measured this Tuesday, while questions about the high points of key rates on both sides of the Atlantic are intense.

“Powell has repeatedly emphasized how the Fed recognizes (and welcomes) that the process of ‘disinflation’ has begun. This applies especially to goods and should soon apply to housing as well. Basic services outside of housing remain the main concern of the Fed. The usual evocation of the lags of the effects of monetary policy has been the main element in justifying the need to examine future indicator publications to better define the way forward. for Ariel Bezalel and Harry Richards, Managers, Fixed Income at Jupiter.

The CPIs, for publication at 2:30 p.m. (Paris time), as well as the next PMIs, are naturally part of it.

The publication of the CPI is expected to slow down to +6.2% at an annualized rate.

William Gerlach, Regional Manager of iBanFirst warns, and warns against a missed target (the market consensus). “The January CPI could turn out to be worse than expected”, anticipates the leader, who continues: “In this case, we could see an increase in volatility in bonds, equities and currencies. This is a serious risk to be taken into account.”

“If the inflation problem persists, which is quite possible, it is likely that the final policy rate in the United States will be higher than the current consensus of 5%. The market is starting to talk about a rate of 6%. A minority of analysts, referring to Taylor’s rule, even predict that the Fed will have no choice but to raise its benchmark interest rate beyond 8%. is that the market is certainly too complacent about falling inflation (and far too confident about the possibility of lower interest rates in the United States this year).”

For the time being, the Euro is showing resistance after the new economic projections of the European Commission, published yesterday. Brussels is more optimistic for growth, expecting gross domestic product (GDP) growth in the euro zone of 0.9% this year against 0.3% for its previous forecast in November. In terms of inflation, the Commission anticipates an average rate of 5.6% in October, and 2.5% in 2024, against 6.1% and 2.6% respectively, in November.

At midday on the foreign exchange market, the Euro was trading against $1.0760 approximately.

KEY GRAPHIC ELEMENTS

The spot EURUSD is winding around its 50-day moving average (in orange), without any sharp technical signal emerging. Note that an acceleration in downward volatility would fully validate a break, which occurs following a gradual weakening from February 6 to 9.

MEDIUM TERM FORECAST

In view of the key graphic factors that we have mentioned, our opinion is neutral in the medium term on the Euro Dollar (EURUSD).

We will maintain this neutral opinion as long as the Euro Dollar (EURUSD) parity prices are positioned between the support at 1.0645 USD and the resistance at 1.1045 USD.

CHART IN DAILY DATA