The US Bureau of Labor Statistics (BLS) will release April Consumer Price Index (CPI) data on Tuesday.
The report is expected to show another big jump in consumer price inflation after the sharp increase in March, driven by higher oil prices due to the ongoing conflict between the United States and Iran.
The monthly CPI is expected to rise by 0.6%, following the 0.9% increase recorded in March, while the annual reading is expected to rise to its highest level since September 2023 at 3.7%, from 3.3% in March.
Core CPI numbers, which exclude volatile food and energy prices, are expected to come in at 0.4% and 2.7% on a monthly and monthly basis. On an annual basis, respectively.
From the beginning of the conflict in the Middle East on February 28 until the end of April, a barrel of West Texas Intermediate crude oil rose by more than 50%. Although Crude oil prices It corrected lower in the first week of May, but is still about 40% higher than before the US-Iran war.
“Our economists expect headline inflation to rise +0.58% m/m, down from +0.9% in March, but still relatively flat,” said Deutsche Bank’s Jim Reed, reviewing the inflation data.
“In contrast, the underlying measure is expected to accelerate to +0.39% m/m from +0.2%, suggesting that underlying price pressures remain steady even as energy-related impacts fade. Annual rates will move from 3.3% to 3.8% for the former and from 2.6% to 2.8% for the latter,” Reid added.
What to expect in the next CPI data report?
April’s CPI numbers will reflect the impact of continued rise in oil prices on inflation. Since this is largely expected, core inflation The numbers will help the markets Measure whether higher energy costs spill over into the broader economy and lead to higher prices for other goods and services.
A reading above market expectations of 0.4% in the monthly core CPI could fuel concerns about higher inflation rates in the economy. Conversely, any reading below analysts’ expectations may ease concerns about prices getting out of control.
However, even in this latter scenario, investors are unlikely to breathe a sigh of relief as the crisis between the US and Iran remains unresolved, and the lack of maritime activity in the Strait of Hormuz continues to pose a significant risk to global energy supply chains.
Minneapolis Fed President Neel Kashkari He said the price shock of a A prolonged closure of the Strait could jeopardize inflation expectations and require a strong policy response.
Likewise, Alberto Muslim, President of the Federal Reserve Bank of St. Louis, noted that inflation is well above the Fed’s target, and added that policymakers need to worry about core inflation, along with tariff and oil shocks.
How could the US CPI report affect the EUR/USD pair?
Markets currently expect a roughly 73% chance of the Fed leaving interest rates unchanged at 3.5%-3.75% by the end of the year, and a roughly 20% chance of a 25 basis point rate hike, according to the CME FedWatch tool.
A stronger than expected monthly core CPI reading for April could push investors toward a rate hike later in the year. In this scenario, the US Dollar (USD) could gather strength with an immediate reaction.
On the other hand, the core CPI reading may have an adverse impact on the US dollar’s valuation. However, unless there are any significant developments that indicate the US-Iran conflict will end soon, any negative impact on the US dollar may remain short-lived.
“Investors will be highly alert to the possibility of a further delay in the first rate cut – or even an inability to ease in the second half of 2026 altogether – in the event of a sharp and sustained rise in energy prices due to the escalation or prolongation of the conflict in the Middle East,” explains Alvin Liu of UOB Group.
“A wider spread of oil-linked prices across the CPI basket would significantly complicate inflation expectations, increasing the risk of the expected year-end cut being pushed back to 2027,” Liu explains.
Eren Sengezer, Senior European Session Analyst at FXStreet, shares a brief technical outlook for the EUR/USD pair.
“The near-term technical outlook for EUR/USD points to a bullish stance lacking strength. The Relative Strength Index (RSI) on the daily chart holds above the 50 level but is retreating after testing the 60 level, and the pair is struggling to move away from the 20-day Simple Moving Average (SMA) despite closing well above it to end the previous week.”
“On the upside, the first resistance zone is at 1.1800-1.1820, where the upper bound of the Bollinger band and the 61.8% Fibonacci retracement of the February-April downtrend are parallel. If EUR/USD can stabilize above this zone, it is possible to see 1.1900-1.1910 (full level, 78.6% Fibonacci retracement) as the next hurdle for the 1.2000 (psychological level).”
Looking south, a strong support zone appears to have formed at the 1.1730-1.1680 area (50% Fibonacci Retracement, 100-day SMA, 200-day SMA). If the EUR/USD pair falls below the lower bound of this range and begins to use it as resistance, technical sellers can take action. In this case, the 1.1660 area (uptrend line) can be considered as a temporary support level before the 1.1560 area (23.6% Fibonacci retracement).”
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