Rising diesel prices have helped fuel inflation — and we're about to see how much worse it could get
As diesel prices rise, inflationary pressures are deepening, presenting new challenges for consumers and businesses alike. The upcoming data release on Thursday is especially crucial as it will potentially quantify the impacts of these soaring costs, which could influence both spending patterns and policy decisions during an election year. The link between higher energy prices and overall inflation underscores the broader economic implications, with traders on high alert.
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). MarketWatch's emphasis on inflation driven by diesel prices suggests alignment with upward pressure on the euro amid cost-push dynamics.
How firms align
Goldman stands aligned with the inflation spiral narrative, forecasting a target of 1.12 as they expect increased costs to weigh on consumer sentiment positively for the euro. Conversely, BofA's more bearish stance at 1.04 indicates skepticism about how much these inflationary pressures will ultimately benefit the euro in a global context, particularly against the dollar.
What the data shows
Recent revisions within our internal reports indicate a nuanced outlook, with some anticipating transitory effects while others suggest persistent inflation may lead to upward adjustments in forecasts. Further insights can be found in /research/inflation_effects.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01Diesel price surges could lead to heightened consumer inflation risks.
- 02FX traders should note increased volatility ahead of economic data releases.
- 03Upcoming data on inflation could hit levels not seen in recent months, impacting dollar and euro valuations.
Market implications
Traders should watch the upcoming inflation data release as a potential catalyst for EUR/USD movement, particularly if figures exceed prior expectations. Keeping an eye on resistance levels near 1.08 could prove crucial following these events.
Risks to this view
If the upcoming inflation data reveals a significant loosening in price pressures or a stabilization in diesel costs, it could invalidate the current bullish narrative surrounding the euro, prompting a review of positions against the dollar.
Sentiment by currency
USD+EUR~JPY~GBP~Composite USD score: +0.40
Sources & References
How we cover this story