Trading the News: U.S. Consumer Price Index (CPI)

A downtick in both the headline and core U.S. Consumer Price Index (CPI) paired with signs of slowing Retail Sales may fuel the recent advance in EUR/USD as it dampens the Federal Open Market Committee’s (FOMC) scope to deliver three rate-hikes in 2018.

Even though the FOMC appears to be on course to deliver a March rate-hike, evidence of greater-than-expected economic slack may push Chairman Jerome Powell and Co. to adopt a cautious tone as inflation continues to run below the 2% target. In turn, another batch of lackluster data prints may trigger a bearish reaction in the U.S. dollar as it encourages Fed officials to project a more shallow path for the benchmark interest rate.

Nevertheless, a slew of positive development may prop up the greenback as it should keep the FOMC on course to implement higher borrowing costs over the comings.

Impact that the U.S. CPI report has had on EUR/USD during the previous release

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post-event )

Pips Change

(End of Day post-event)

DEC

2017

01/12/2018 13:30 GMT

2.1%

2.1%

-6

+64

December 2017 U.S. Consumer Price Index (CPI)

EUR/USD 5-Minute Chart

The U.S. Consumer Price Index (CPI) narrowed to an annualized 2.1% from 2.2% in November, while the core rate of inflation unexpectedly climbed 1.8% during the same period amid forecasts for 1.7% print. A separate report showed Retail Sales climbing 0.4% in December amid projections for a 0.5% print, while Average Hourly Earnings increased 0.4% during the month.

The mixed set of data prints sparked a choppy reaction in EUR/USD, but the greenback struggled to hold its ground throughout the day as the pair closed at 1.2203.