U.S. consumer prices are forecasted to decline by 0.9% from a year ago as oil prices are lower by 50% despite their recent rise. An inline print will ease some of the recent concerns that the upside risks of inflation are increasing as the central bank continues to print money.
| June 17 | U.S. CPI (MAY)(YoY)(GMT 12:30: 08:30 EDT) |
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| Expected: -0.9% |
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| | Previous: -0.7% |
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Fundamental Outlook
U.S. consumer prices are forecasted to decline by 0.9% from a year ago as oil prices are lower by 50% despite their recent rise. An inline print will ease some of the recent concerns that the upside risks of inflation are increasing as the central bank continues to print money. Fears are growing that the Fed may need to start tightening monetary policy sooner than their projection of mid 2010 which could limit the scope of a recovery. Therefore, we could see this inflation release generate more price volatility than the past few with its potential impact on interest rate policy. Yesterday’s lower than expected PPI reading lowers the chances that we could se an upside surprise in consume prices. However, rising gasoline prices could send the monthly reading higher which is already projected to gain by 0.3%. A significant move higher in short term inflation could be enough to raise a red flag and lead to bullish dollar sentiment. This would support a continuation of the bearish EUR/USD technical bias. Conversely, an inline print would justify current monetary policy and lead to more dollar weakness providing support for the emerging bullish technical scenario.
Technical Outlook
