Prices rose by 0.4% in October from the previous month, the Labor Department said Tuesday, cooling from the 0.6% increase in September
The latest CPI data from the Labor Department indicates a 0.4% increase in prices for October, a moderation from the 0.6% rise in September. This cooling trend is significant amid ongoing concerns about inflationary pressures and could influence the Fed's monetary policy approach. Traders are now closely monitoring inflation metrics as they reassess interest rate expectations, which could affect the USD's trajectory in the near term.
Where it sits in our coverage
Our consensus EUR/USD target sits at 1.075 (median across 8 firms), with Goldman at the upper bound (1.12) and BofA at the lower (1.04). The recent CPI data may align more closely with JPMorgan's view of a stable dollar as inflation eases, contributing to their 1.10 target for March.
How firms align
JPMorgan maintains an aligned stance with the cooling inflation data, supporting its 1.10 target for the EUR/USD pair. In contrast, BofA's more bearish outlook at 1.04 reflects concerns about GDP growth and potential for stronger dollar support beyond just the inflation figures.
What the data shows
Recent research suggests an adjustment in inflationary expectations, which may be confirmed if November data continues this trend. For further insights, refer to our analysis at /research/<slug>.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01CPI growth slows to 0.4% in October, suggesting easing inflation pressures.
- 02A shift in Fed rate expectations could bolster the USD.
- 03Watch for potential support at 1.10 for EUR/USD based on this inflation data.
Market implications
Traders should watch the 1.10 level in the EUR/USD as a key resistance point, especially with potential shifts in monetary policy discussions. The upcoming FOMC meeting could provide further clues for positioning.
Risks to this view
A surprise uptick in inflation, or particularly strong employment data could undermine this view, forcing a re-evaluation of rate hike expectations and potentially benefiting the USD.
Sentiment by currency
USD+EUR JPY GBPComposite USD score: +0.60
Sources & References
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