Without a shadow of a doubt the main attraction of the day is the final CPI print from the United States for the month of May, which will provide traders with additional clues as to how Trump’s tariffs impacted consumer prices, but more importantly how this piece of data could steer the Fed’s policy decisions in the foreseeable future.
Increasingly hawkish commentary from renowned economists that Trump’s tariff agenda will be detrimental for the US consumer and will result in an unequivocal reignition of inflationary pressures, has nudged analysts to upwardly revise their expectations in anticipation of the event and today’s release maybe the first in line that could showcase such effects.
Projections for headline inflation point to a two tenths of a percent rise, rising from the 2.3% to the 2.5% level, and for the core rate, which excludes volatile food and energy prices, expectations point to a tenth of a percent rise, from the 2.8% to the 2.9% level.
Should both rates display an uptick above market forecasts, we would reasonably expect to see the greenback receive inflows and rise from its recent fall into 2022-year lows, as traders will most likely begin to expect the Federal Reserve to slash rates faster, to safeguard the integrity of the US economy.
Money markets have now moved in, to price in a 25bps rate reduction in the September meeting and another of similar magnitude in December, which would leave a key policy rate of 4% at the end of the year.
Technical Analysis
Gold Chart – The safe haven asset stays in consolidation mode ahead of crucial CPI print
Resistance: 3420 (R1), 3500 (R2), 3600 (R3)
Support: 3210 (S1), 3140 (S2), 3050 (S3)