- CPI data for May will be released on 12 June 2024. US consumer inflation is cooling down slightly, but policymakers will need to see several more months of disinflation before considering loosening policy.
- According to Kar Yong Ang, Octa broker's financial market analyst, despite the slow pace of inflation reduction, high interest rates cannot be maintained for too long.
- The US dollar is weakened by the consumer inflation that's starting to slow in the US. The main target for EUR/USD is 1.09100–1.09400.
The US Bureau of Labor Statistics will release the Consumer Price Index (CPI) report on Wednesday, 12 June.
The annual inflation rate in the US eased to 3.4% in April 2024 from 3.5% in March, which had been the highest reading since September, aligning with market forecasts. Core CPI, which excludes food and energy prices, rose by 0.3% in April after increasing by 0.4% each month in the first quarter. Year-over-year, core CPI was up 3.6%, down from 3.8% in March, being at the lowest level since the first half of 2021. April's CPI report was received warmly by the Federal Reserve. Still, after the upside surprises in the first quarter, policymakers will need to see more months of encouraging disinflation before considering loosening policy.
On 3 June, data revealed that the US Institute for Supply Management's (ISM) manufacturing purchasing managers' index (PMI) dropped to 48.7 in May from 49.2 in April, continuing its decline from an 18-month high of 50.3 in March. This ISM decrease followed similar weaknesses in the Chicago PMI, Dallas Fed, Philadelphia Fed, and Empire State manufacturing indices.
"The US economy is showing signs of slowing down, putting additional pressure on Fed officials. Despite the slow pace of inflation reduction, high interest rates cannot be maintained for too long", said Kar Yong Ang, broker's financial market analyst.
Market participants expect inflation to continue slowing in May, with projections for CPI to rise by 0.2% for the month. With consumer inflation in the US starting to slow, the probability of interest rate cuts is increasing, putting more bearish pressure on the US dollar. For currency traders, this means that the bullish trend in EUR/USD may continue for a few days after the publication of inflation data, and the pair may target 1.09100–1.09400.