NFP Report Overshoots Again. Attention Shifts to CPI
Euro Bulls Eye 1.1000. Can the Bears Do Anything About It?
It’s almost becoming a trend for the Non-Farm Payrolls to extend way beyond the expectations in 2024. Thus far, all three NFP reports of the year came out better than expected. In January, the actual number was 216K (expectations: 168K); in February we had a huge difference: forecast 187K and actual 353K. Last week the trend continued as the actual number was 275K, a big distance away from the expected 198K.
The Dollar Index (DXY) fell sharper last week, posting a more than 1.0% loss, mostly due to expectations that the Fed may soon start to slash borrowing costs. However, Fed Chair Jerome Powell pointed out that inflation is still not declining enough for the central bank to start cutting the interest rate. He also indicated that FOMC members are “not far” from finally taking action.
And speaking of inflation, this week the main gauge of inflation will be released: the U.S. Consumer Price Index. If the CPI report comes above expectations, it would boost the USD as it would spark speculation that the Fed will keep the rates higher for longer in order to combat stubborn inflation.
Economic Calendar Highlights
The main event of the week will also be the first one: the U.S. CPI will come out Tuesday at 12:30 pm GMT and is expected to show a 0.4% change (previous 0.3%) month over month. The yearly number is expected to stay the same at 3.1%, while the Core monthly figure is expected to change from the previous 0.4% to 0.3%.
Thursday at 12:30 pm GMT we take a look at the U.S. Core Producer Price Index (PPI), which has inflationary implications, and at the Core Retail Sales report, which is expected to show an increase in such sales from the previous -0.6% to 0.5%. The “vanilla” PPI and Retail Sales reports will come out at the same time.
Friday we have two more notable events: The Empire State Manufacturing Index and the Prelim UoM Consumer Sentiment. The release times are 12:30 pm GMT and 2:00 pm GMT, respectively.
Technical Outlook – EUR/USD
The pair is currently trading at 1.0940, after trading as high as 1.0980 and coming very close to the key level at 1.1000. The bulls have managed to break the 50-day Moving Average quite convincingly and it looks like they will remain in control for the time being.
The RSI is approaching overbought but it doesn’t signal any imminent reversal, so a touch of the next resistance (1.1000) is probable.
Right now, the US Dollar is very sensitive to the fundamental shifts and to the economic data, especially to inflation numbers. Given that the most important inflation report is set to come out this week, we may see some interesting swings on the charts.
