U.S. inflation data will be the most important event this week, as investors will want to know the current situation and assess whether the recent increase was temporary or not. The consensus for core CPI m/m is 0.3% from 0.4% previously; CPI m/m is 0.4% from 0.4% previously; and CPI y/y is expected to fall from 3.5% to 3.4%.

US inflation levels

If this week’s data is below consensus, the expectation of an interest rate cut is likely to increase. Analysts believe that a reading of 0.2% or lower will give the Fed hope that y/y inflation will fall toward its 2% target, but for now this seems unlikely. However, even if inflation does not fall as fast as previously expected, at least it will not rise.

Higher inflation than expected is likely to strengthen the dollar and push back interest rate cuts.

GBP – The pound is very vulnerable to any weak labor market data that will be released on Tuesday. Last week, the BoE took the first step toward a final decision to cut interest rates.

AUD – Employment and wage data could affect AUD, as the RBA bases its decisions on updated data.

EU inflation data on Friday – there could be volatility on the EUR, especially if the data deviates from expectations.

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The above analysis is based on the PA+MACD strategy, a detailed description of which you can read HERE . I will talk more about the PA+MACD strategy applied to these currency pairs during the live trading sessions, which you can attend from Monday to Friday.
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