Breaking: US CPI inflation declines to 3.2% vs. 3.3% forecast

The US Bureau of Labor Statistics (BLS) reported on Tuesday that inflation in the United States, as determined by the Consumer Price Index (CPI), dropped to 3.2% on an annual basis in October. This rate was lower than both the market prediction of 3.2% and the inflation rate from September, which was 3.7%.

Stay updated with our real-time coverage of the US inflation report and how the market is responding.

In the given time frame, the Core CPI, which does not take into account the unpredictable prices of food and energy, increased by 4%, just slightly below the predicted estimate of 4.1% by analysts. When looking at a monthly basis, the overall CPI did not show any changes, whereas the Core CPI rose by 0.2%.

According to the press release by the BLS, the cost of shelter increased in October which balanced out the decrease in gasoline prices. As a result, the overall index for the month remained unchanged. Additionally, the energy index decreased by 2.5% due to a significant decline in gasoline prices, although other components of the energy index saw increases.

Market reaction to US CPI data

The US Dollar experienced significant selling pressure as an immediate response. Currently, the US Dollar is being affected, as of the time of reporting. Dollar Index The value of the mentioned entity decreased by 0.65% to 105.00, while the yield of the 10-year US Treasury bond, which is used as a reference, decreased by almost 3% to approximately 4.5%.

US Dollar price today

The information in the table depicts the fluctuation in the percentage of the US Dollar (USD) compared to various major currencies today. Among these currencies, the Australian Dollar experienced the most significant gain against the US Dollar.

The heat map visually displays the percentage changes of different major currencies relative to one another. The currency chosen as the base is selected from the left column, while the quote currency is chosen from the top row. To clarify, if the Euro is chosen as the base and the Japanese Yen is selected by moving horizontally along the line, the percentage change presented in the corresponding box will represent the exchange rate of EUR (base) to JPY (quote).

This excerpt was released at 03:00 GMT in advance of the United States’ October inflation data.

• It is predicted that the Consumer Price Index in the United States will have a year-on-year increase of 3.3% in October, which is lower than the 3.7% increase recorded in September.

• It is predicted that there will be no change in the core Consumer Price Index (CPI) inflation rate, which is expected to remain at 4.1% throughout October.

• The US Dollar’s value could be greatly affected by the US CPI inflation report, as it has the potential to change how investors perceive the Federal Reserve’s interest rate expectations.

At 13:30 GMT, the Bureau of Labor Statistics (BLS) will release the long-awaited October inflation data known as the US Consumer Price Index (CPI).

The USD has remained stable compared to other major currencies, but it is finding it difficult to build on its previous gains when it experienced an upward trend between July and October, resulting in a 6% increase in the USD Index.

Although the Federal Reserve remains committed to its data-driven approach to monetary policy, it is widely anticipated that they will not change interest rates this year, holding steady at the range of 5.25% to 5.5%. According to the CME Group FedWatch Tool, there is an over 80% chance that the Fed will maintain current policy during the December meeting. During a recent IMF conference, Fed Chairman Jerome Powell stated that they make decisions on a meeting by meeting basis, taking into account incoming data and its impact on the economic outlook and inflation.

The inflation data in the US CPI could impact the market’s perspective on the Federal Reserve’s interest rate expectations. This is particularly relevant as Powell mentioned at the IMF event that they were unsure if their current policies were strong enough to effectively lower inflation to the target of 2%.

What can we anticipate in the upcoming CPI data report?

It is predicted that the US Consumer Price Index will increase by 3.3% in October compared to the 3.7% increase seen in September. The Core CPI, which does not include food and energy prices, is expected to rise by 4.1% during the same period, matching the September data.

In October, there was a 0.1% increase in the monthly Consumer Price Index (CPI) and a 0.3% increase in the Core CPI. After four straight months of increases, oil prices dropped by 10% in October, specifically the price of West Texas Intermediate (WTI) per barrel. The decrease in oil prices was influenced by reduced worries about the Israel-Hamas conflict escalating into a larger conflict in the Middle East, thus putting pressure on oil prices to stay low.

TD Securities analysts stated that the US October inflation report is expected to show an increase in core price inflation for the third consecutive month, with a modest 0.4% month-on-month increase.

“Prices of goods are expected to contribute to inflation, while the housing market is projected to have a slower growth. The prices of airfares and lodging remain uncertain factors. Additionally, the decrease in gas prices is expected to help control inflation rates in October. Based on our month-over-month predictions, we anticipate a 3.3% increase in overall prices and a 4.2% increase in core prices year-over-year.”

During October, the Prices Paid Index of the ISM Services PMI survey experienced a slight decrease from 58.9 to 58.6, indicating that input price pressures in the service sector remained strong. On the other hand, the Price Index of the Manufacturing PMI increased from 43.8 to 45.1, suggesting that deflation in the manufacturing input costs continued.

What is the scheduled release date for the Consumer Price Index report and what impact might it have on the EUR/USD currency pair?

The inflation data for October, known as the Consumer Price Index (CPI), will be released at 13:30 GMT. If the monthly core inflation rate is 0.5% or higher, it could lead to speculation that the Federal Reserve (Fed) will adopt a more hawkish stance, which could strengthen the US dollar immediately. Conversely, if the core CPI increase is only 0.2% or less, it would likely confirm that the Fed will not change its policy, which could weaken the currency. The market trends suggest that a rally in the US dollar is expected to have more momentum than a decline.

According to FXStreet analyst Yohay Elam, significant positive surprises of 0.2% or higher would be necessary for the market to reconsider the Federal Reserve’s perspective.

Elam stated that if the data takes a negative turn, the positive trend on Wall Street would persist while the US Dollar would face further adverse effects. However, if the data matches expectations, the decrease in overall inflation is expected to have an immediate positive effect on the stock market and negatively impact the US Dollar, even if the underlying consumer price index remains high.

Mouhammad Abdallah, the lead analyst for the European session at OXShare, provides a concise analysis of the current technical situation for EUR/USD.

The RSI indicator on the daily chart remains slightly above 50, indicating a lack of clear direction. The EUR/USD currency pair is very close to the level of 1.0650, which is an important marker in technical analysis known as the Fibonacci 23.6% retracement. If the price closes below this level, it could draw the attention of traders who use technical analysis and potentially lead to a further decline towards the levels of 1.0600 (a psychologically significant level) and 1.0500 (a static level and also psychologically significant).

“The 1.0750 level, which represents a 38.2% retracement according to Fibonacci analysis, is the initial resistance for the pair. This is followed by the 1.0800 level, which aligns with the 100-day Simple Moving Average and the 200-day SMA. If the pair successfully surpasses this level and begins to utilize it as a support level, it would strongly indicate that EUR/USD is experiencing an upward trend. In such a scenario, the next bullish targets would be set at 1.0850, representing a 50% Fibonacci retracement, and 1.0950, representing a 61.8% Fibonacci retracement.”

US Dollar FAQs

What is the US Dollar?

official sources. The USD is widely accepted and used in international trade and financial transactions. It is also considered a reserve currency, meaning that many central banks around the world hold large amounts of USD as part of their foreign exchange reserves. With its dominance in the global economy, the USD holds significant influence and impact on international markets and economies. data from 2022.

After World War II, the US Dollar replaced the British Pound as the dominant global currency. Throughout its existence, the US Dollar had been supported by Gold, but this changed in 1971 with the Bretton Woods Agreement when the Gold Standard was discontinued.

What kind of influence do the decisions made by the Federal Reserve have on the value of the US Dollar?

Monetary policy, determined by the Federal Reserve (Fed), is the main factor that significantly affects the value of the US Dollar. The Fed has two crucial objectives: maintaining price stability by controlling inflation and promoting full employment. The primary approach it uses to accomplish these goals is by regulating interest rates.

If prices are increasing too fast and inflation is higher than the Federal Reserve’s desired 2% rate, the Federal Reserve will increase interest rates to improve the value of the United States dollar. Conversely, if inflation drops below 2% or the unemployment rate is too high, the Federal Reserve may reduce interest rates, which negatively impacts the value of the U.S. dollar.

What exactly is Quantitative Easing and what impact does it have on the value of the American currency?

In dire circumstances, the Federal Reserve has the option to generate additional Dollar bills and implement a strategy referred to as quantitative easing (QE). QE involves the deliberate boost of credit within a stagnant financial system by the Fed.

When banks become unwilling to lend to each other due to the fear of default, a non-standard policy called quantitative easing (QE) is implemented. This measure is used as a last resort when reducing interest rates alone is not sufficient to achieve the desired outcome. QE was the preferred method employed by the Federal Reserve during the 2008 Great Financial Crisis in order to address the credit crunch. It involves the creation of additional US Dollars by the Fed, which are then used to purchase mainly US government bonds from financial institutions. Typically, quantitative easing leads to a decline in the value of the US Dollar.

What is the impact of Quantitative Tightening on the US Dollar and how does it affect it?

The act of quantitative tightening (QT) refers to the Federal Reserve discontinuing its purchases of bonds from financial institutions and refraining from reinvesting the principal from the maturing bonds into new purchases. This action generally has a favorable impact on the value of the US Dollar.

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