US Core CPI numbers will be coming out on Tuesday, July 22, 2014 at 12:30 PM GMT. The forecasts for MoM and YoY are 0.2% and 2.0% respectively. Previous monthly and yearly figures were 0.3% and 2.0% while previous forecasts were 0.2% and 1.9% (each exceeded by 0.1%).
The core inflation rate excludes food and energy prices which account for a combined 24% of the unadjusted inflation rate, these categories are said to be more volatile and can therefore give a distorted view of the economy.
Recently the US core inflation rate has spiked over the past 4 months even though the core rate is meant to be a more stable indicator of consumer prices in the economy. Similar patterns can be observed in the unadjusted YoY rate.
The major pairs which are affected by this news will be the EURUSD and the GBPUSD.
After the US Dollar’s rally last week the EURUSD declined to its support of 1.35200. The pair has been on the decline from early May and recent levels haven’t been reached since mid June. Current support hasn’t been broken but has been breached multiple times.
With the announcement forecasted to increase by 0.1% to 2.0% (over last month’s 1.9%) there is a high chance this will be realized as previous estimates have largely been on point or underestimated. If we see a figure larger than 2.0% I would expect current support to break and decline towards a target of 1.35120.
After an unsuccessful rally last week to break its resistance of 1.71670 the GBPUSD shifted momentum towards the downside. The pair currently holds at a support of 1.70842.
Though Tuesday’s CPI figures will have an impact on the pair’s price action for the week, other major announcements that will affect the pair include US existing home sales and MPC’s meeting minutes.
Depending on the outcome of these events we might see current support broken to move towards a target of 1.70622 or a rally towards resistance of 1.71670.