- Economists expect a slight slowdown in both overall and core CPI.
- Tariffs and potential future universal tariffs are a key concern.
- The US Dollar Index is currently struggling technically.
US CPI inflation data will be released on Wednesday March 12 at 12h30 GMT time. Markets are paying close attention to the release as it may offer insights into the trajectory of inflation amid an economy balancing persistent price pressures and emerging signs of a slowdown.
What are Markets Expecting from the CPI Data?
Economists expect February’s overall CPI to go up by 0.3% compared to last month, slowing down from January’s 0.5% increase. This slowdown would bring yearly inflation down to 2.9% from January’s 3.0%, marking the first time it has dropped below 3% since early 2023.
For core CPI, which leaves out food and energy prices, forecasts also point to a 0.3% monthly rise. Annually, core inflation is expected to slightly ease to 3.1% from 3.3% in January.
While this suggests inflation might be slowing, there are mixed signals in the economy. Wages are growing faster than expected, but costs for services are coming down, and demand in some key industries is weakening. This creates an unclear picture for where inflation is headed while inflation expectations have shown significant increases off late. 
A Market at a Crossroad – Why This CPI Print Matters
Inflation trends are important for Federal Reserve decisions and financial markets. The Fed is focused on bringing inflation down to its 2% target, but unexpected changes in recent economic data have made things more uncertain. Recessionary fears have also muddied the outlook on Fed rate policy moving forward.
Markets are keeping a close eye to see if inflation will keep slowing or start rising again as tariffs are now playing a key role.
The imposition of tariffs on imports from Canada, Mexico, and China has raised concerns about future price pressures. These tariffs could add to goods inflation as businesses pass higher costs on to consumers.
There have also been warnings from President Trump that universal tariffs are still scheduled to come into effect on April 2, 2025. This would add just another layer of intrigue, while at the same time spur on fears of a potential recession.
Stagflation Concerns Loom
Stagflation, where the economy slows down but prices stay high, presents a tough challenge. If this happens, the Federal Reserve would have fewer options to manage the situation. Economists say that long-lasting tariffs and issues in the job market could make things worse. US data of late has been softer than expected while some companies have issued warnings around prospects for the next 12 months adding to the stagflation narrative.
Potential Market Impact
Looking at the potential scenarios from the CPI release, I have created a table that may help. Now this of course is no guarantee as to how the market may react but rather my take on the potential movements that could materialize.
Source: LSEG, TradingEconomics.
The above table provides an insight into what I expect will happen depending on the CPI prints released later in the day.
My personal expectations are that the data will land quite close to expectations which could lead to some short-term volatility and whipsaw price action before markets settle down.
Technical Analysis
US Dollar Index (DXY)
From a technical standpoint, the US Dollar Index Futures has struggled and continues to do so. The index is trading below the levels it did when the US election took place on November 5 2024.
The only positive for the US Dollar at the moment is that the 14-period RSI is in oversold territory. A sign that a recovery may be around the corner?
However, as we know the RSI could hover in oversold territory for extended periods of time.
The CPI print will definitely stoke some volatility but at present the tariff and geopolitical developments are overshadowing data releases.
Given that there is the possibility that any move may prove short-lived as tariff developments and comments are coming through thick and fast.
Immediate resistance rests at 103.650 and 104.00 before the confluence level at 105.00.
Immediate support rests at 103.170 and 103.00 before the 102.65 and 102165 handle comes into play.
Support
- 103.17
- 103.00
- 102.65
Resistance
- 103.65
- 104.00
- 105.00