US consumer inflation is creating a worrying environment for investors. Rising housing and petrol prices worsen consumer inflation, thereby delaying key rate cuts and strengthening the dollar.
- CPI data for March will be released on 10 April 2024. Concerns remain that inflation will continue to rise.
- According to Fed Chairman Jerome Powell, rising prices largely align with expectations.
- The continued rise in US consumer inflation strengthens the US dollar. The main target for EUR/USD is 1.0730–1.0740.
The US Bureau of Labor Statistics will release the Consumer Price Index (CPI) report on Wednesday, 10 April.
The latest US inflation report showed that rising prices continue to pressure US consumers. The annual consumer inflation in February 2024 ticked higher to 3.2%, above forecasts that January's 3.1% level would remain. More than two-thirds of this increase is due to rising housing and petrol prices which means that the Fed is far from achieving its 2% inflation target.
'Investors should not be so upset about rising inflation as the data is largely in line with market expectations, as also reported by the Fed Chairman in his speech last week', said Kar Yong Ang, the Octa financial market analyst.
'However, the rise in energy prices will continue to weigh on the index components,' he added.
With consumer inflation in the US continuing to grow, the probability of interest rate cuts is decreasing, giving more power to the US dollar. For currency market participants, this means that EUR/USD may keep declining for a few days after the publication of inflation data and target 1.0730–1.0740.