US CPI data is critical for the FED - expect strong USD volatility

The cost of living in the US is likely to grow - just not as fast as it was at the beginning of the year and as expected by the Federal Reserve. Consumer prices rose 0.3% in January, the strongest growth since September 2017, but the Fed believes that against the backdrop of rising risks to the US economy, this is still low to promise implementation of the plan for 3 to 4 hikes in 2018. The CPI data we expect tomorrow will be decisive for both, the FED and the USD. The consensus forecast remains static at 0.2%, as in the past nearly 3 years.

February data will be the first clean data for the year after consumer spending grew during Christmas and New Year holidays, which have a strong impact on January consumption. Data is important for traders and especially for USD. Looking at the Fed, better-than-expected data will lead to a strong upward momentum in the USD and vice versa, a weaker rise in prices will lead to a USD drop and an opportunity to delay the Fed's interest rate rhythm in 2018.

Source: Bloomberg Pro Terminal

Jr Trader Petar Milanov

Read more:

• USA ADP Nonfarm Employment Change: 202K vs 160K
• Iran response was ‘too fast and too furious’ on the U.S. airstrike
• USA – ISM Non-manufacturing PMI: 55.0 vs 54.5
• Top 5 things to watch on Tuesday
• Noise: How to Overcome the High, Hidden Cost of Inconsistent Decision Making