EUR/USD: Focus on US CPI and Fed cuts – Deutsche Bank

Deutsche Bank analysts note that EUR/USD was little changed, with the Dollar Index edging higher, as markets await the US CPI release for January. The bank’s US economists project a softer headline CPI but firmer core, and traders have nudged Fed rate-cut expectations higher after weaker US data, while still pricing further easing under a new Fed Chair.

US inflation and Fed expectations eyed

"Looking forward, attention will today turn to the US CPI print for January, which is a couple of days later than expected because of the partial government shutdown."

"This is an important one, because markets are still expecting further rate cuts under a new Fed Chair, but stronger data like the jobs report on Wednesday has led to a bit more doubt as to whether that’s still possible."

"In terms of what to expect, our US economists forecast that monthly headline CPI would be at +0.26% in January, down from +0.31% in December."

"However, they think that headline inflation would be weighed down by a -2.4% decline in motor fuel prices, meaning that core CPI should be relatively strong at +0.35% on the month."

"For instance, the amount of cuts priced in by the December meeting was up +5.3bps on the day to 53bps."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)