Inflation in the United States (US), as measured by the change in the Consumer Price Index (CPI), declined to 2.3% on a yearly basis in April from 2.4% in March, the US Bureau of Labor Statistics (BLS) reported on Tuesday. This reading came in below the market expectation of 2.4%.
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The core CPI, which excludes volatile food and energy prices, rose 2.8% on a yearly basis, matching the March print and analysts’ estimate. On a monthly basis, the CPI and the core CPI both rose by 0.2%.
Market reaction to US inflation data
These figures don’t seem to be having a significant impact on the US Dollar’s (USD) performance against its major rivals. At the time of press, the USD Index was down 0.25% on the day at 101.53.
US Dollar PRICE This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 1.20% | 0.65% | 1.30% | 0.66% | -0.10% | 0.38% | 0.95% | |
| EUR | -1.20% | -0.42% | 0.66% | -0.05% | -0.65% | -0.33% | 0.24% | |
| GBP | -0.65% | 0.42% | 1.25% | 0.38% | -0.22% | 0.02% | 0.66% | |
| JPY | -1.30% | -0.66% | -1.25% | -0.65% | -2.01% | -1.76% | -0.59% | |
| CAD | -0.66% | 0.05% | -0.38% | 0.65% | -0.49% | -0.29% | 0.28% | |
| AUD | 0.10% | 0.65% | 0.22% | 2.01% | 0.49% | 0.23% | 0.87% | |
| NZD | -0.38% | 0.33% | -0.02% | 1.76% | 0.29% | -0.23% | 0.54% | |
| CHF | -0.95% | -0.24% | -0.66% | 0.59% | -0.28% | -0.87% | -0.54% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
This section below was published as a preview of the US Consumer Price Index (CPI) data at 03:00 GMT.
- The US Consumer Price Index is set to rise 2.4% YoY in April, the same growth rate as in March.
- The core CPI inflation is forecast to hold steady at 2.8% last month.
- April’s inflation data could impact the Fed’s policy outlook, rocking the US Dollar.
The high-impact United States (US) Consumer Price Index (CPI) inflation report for April will be published by the Bureau of Labor Statistics (BLS) on Tuesday at 12:30 GMT.
The CPI data will likely have a significant impact on the US Dollar’s (USD) performance and the Federal Reserve’s (Fed) path forward on interest rates.
What to expect in the next CPI data report?
As measured by the CPI, inflation in the US is forecast to rise at an annual rate of 2.4% in April, at the same pace as in March. The core CPI inflation, which excludes the volatile food and energy categories, is expected to stay at 2.8% year-over-year (YoY) in the reported period, as against a 2.8% growth in the previous month.
On a monthly basis, the CPI and the core CPI are projected to rise by 0.3% each.
Previewing the report, analysts at BBH highlighted: “Keep an eye on super core (core services less housing), a key measure of underlying inflation. In March, super core inflation fell to a four-year low of 2.9% YoY vs. 3.8% in February. Higher tariffs can ultimately derail the disinflationary process.”
How could the US Consumer Price Index report affect EUR/USD?
At its May policy meeting last week, the Fed kept the federal funds rate unchanged in the range of 4.25% to 4.50%, maintaining a cautious stance on the policy outlook. The Fed’s policy statement underscored that risks of higher inflation and unemployment had risen.
During the post-policy meeting press conference, Fed Chairman Jerome Powell noted that near-term inflation expectations have increased due to tariffs and added that it’s time for them to wait before adjusting policy.
The CME FedWatch Tool currently indicates that the odds of a 25 basis points (bps) rate cut in June stand at 15%, down from about 34% at the start of the month.
Over the weekend, the US and China said they made substantial progress at the high-level trade negotiations in Geneva, Switzerland. The highly anticipated US-China joint statement on the first round of trade talks showed that both sides agreed to suspend part of their tariffs for 90 days, with tariffs to come down by 115 percentage points (US cut levies to 30% from 145% and China to 10% from 125%).
Amid US-China trade deal optimism, the US Dollar (USD) build on its recent recovery momentum heading into the inflation data release. A surprise uptick in the annual headline CPI inflation print could affirm bets that the Fed will hold the policy in June. In this case, the USD could see another leg higher in an immediate reaction, smashing the EUR/USD pair back toward the 1.1000 threshold.
Conversely, a softer-than-expected reading could revive the USD downtrend on renewed dovish Fed expectations, helping EUR/USD stage a comeback toward the 1.1300 round figure.
Dhwani Mehta, Asian Session Lead Analyst at FXStreet, offers a brief technical outlook for EUR/USD and explains:
“The Relative Strength Index (RSI) indicator on the daily chart has pierced through the midline from above as EUR/USD extends the break below the 21-day Simple Moving Average (SMA) at 1.1317 after having failed several attempts to find acceptance above the 1.1380 hurdle this month.”
“On the upside, the immediate resistance is at the 21-day SMA at 1.1322, above which the 1.1380 static level and 1.1450 psychological barrier will be targeted. Alternatively, the first support could be spotted at the 50-day SMA at 1.1063 and the 1.1000 mark.”
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
