The Market Is Waiting for Inflation Values in the US

Tomorrow one of the most significant events of the week will take place, which can greatly affect the sentiment of participants in both the currency and stock markets - at 15:30 GMT+3 inflation data will be published, namely: the values of the CPI (Consumer Price Index) and Core indices CPI.

According to ForexFactory, analysts expect the following values:
→ Core consumer price index, excluding food and energy prices, (Core CPI) in monthly terms: forecast = 0.3%, previous value = 0.4%
→ Consumer Price Index (CPI) in monthly terms – similar: forecast = 0.3%, previous value = 0.4%.
→ CPI in annual terms: forecast = 3.4%, previous value = 3.2%.

The Fed's inflation target is 2%. The values that will be published tomorrow may greatly affect market participants' expectations regarding the Fed's monetary policy.

According to the CME FedWatch tool:
→ traders are confident that the Fed will leave the rate unchanged in May;
→ the probability that the Fed will cut rates in June is just over 50%. But if the CPI indicates that inflation is stable, the likelihood will likely decrease.

Minneapolis Fed President Neel Kashkari said last week that a Fed rate cut was not a possible scenario if inflation continued to move sideways. George Lagarias, chief economist at Mazars, told CNBC, "I wouldn't be surprised if we see smaller rate cuts by the end of the year."

As the chart of the Dow Jones Index (US-30) shows, today the mood in the stock market can be described as cautious, since:
→ The 39,300 level, which served as support at the end of March, acts as resistance in April (shown in black).
→ The trend line, which has served as support since February, also changed its role to resistance (shown in purple).

It is possible that high CPI readings will cause the price of US-30 to decline further as market participants increase confidence that the Fed will continue to pursue tight policies to curb inflation for longer.

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