US inflation data will be released today. A weaker month-on-month data will exacerbate positioning, which has come to rapidly reduce bullish USD positions recently and support risk appetite. TD Securities economists report that this could test key levels in EURUSD and USDJPY.
Modest relief from core CPI
“We expect core prices to remain strong month-on-month, despite our expectation of a slowdown from September. In fact, we forecast a solid 0.4%m/m increase in the core CPI series. As for general inflation, we expect it to post its biggest mom increase in four months, at 0.6%. Our month-on-month projections imply that headline and core CPI inflation likely slowed year-on-year in October“.
“A softer monthly core CPI figure will likely exacerbate risk sentiment that a terminal rate at or above 5% may be enough to curb the worst inflation in decades. This is likely to broaden FX market positioning.” , which has moved aggressively to reduce bullish dollar positions, according to our estimates.”
“We believe there is a risk that even a positive CPI surprise could trigger a positioning squeeze.although the sustainability of that could be questioned.”
“We think USDJPY would risk testing the 143.75 level if the core CPI figure holds, while EURUSD will be exposed at 1.01-1.02.”
Source: Fx Street
With 6 years of experience, I bring to the table captivating and informative writing in the world news category. My expertise covers a range of industries, including tourism, technology, forex and stocks. From brief social media posts to in-depth articles, I am dedicated to creating compelling content for various platforms.
