The dollar index is trying to hold inside of the bullish trend channel ahead of the CPI data. More than 2 daily closes below 95.500 will not be good for dollar bulls. A downside breakout may boost EURUSD’s recent run which began after the re-test of the major long-term trend line.
Oil increased more than %15 and gas increased more than %25 in January. The tight jobs market and rising energy prices are boosting for a CPI increase. Last year, CPI data decreased in January which also give a boost to this CPI data because of YoY effects. On the other hand, in January omicron slows the economy which will slow the inflation in some sectors.
According to the Bloomberg survey, the majority of the economist estimates %7.2-7.3 YoY CPI data. The lowest estimate is %7, which is the previous month’s value. As seen above, the expectations are mostly distributed normally. Below 7 and above 7.4 or 7.5 may cause major surprise in the markets and disturb FED expectations of the March meeting. A down surprise, decrease the FED’s 2 rate hikes possibility greatly, and an up surprise might increase it.
The markets, currently expect 5.475 rate hikes from the FED in 2022. 50 basis points rate hike in March is at %28.8. An upside big surprise might increase this odd and boost the dollar index to stay inside of the bullish trend.
