Today, the highly anticipated US Consumer Price Index will be released. Slowing year-on-year growth is expected, which is likely to support the market’s expectation of the Fed keeping interest rates unchanged in the upcoming FOMC meeting. However, depending on the degree of deviation from market expectations, it could impact the strength of rate hike expectations for July. It is important to closely monitor the market’s reaction after the release.
The expected figures for the May US Consumer Price Index are a year-on-year increase of +4.1% (compared to the previous +4.9%) and a core year-on-year increase of +5.2% (compared to the previous +5.5%). The market is likely to react sharply to any deviations from these numbers. If there is a clear slowdown in the core year-on-year figure, the market is likely to strengthen its selling of the US dollar.
It is also important to watch the month-on-month figures. Market expectations are at +0.1% (compared to the previous +0.4%), which is barely in positive territory. If the figure remains flat or turns negative, it would have a significant impact on market sentiment. The core month-on-month figure is +0.4% (compared to the previous +0.4%). If there is an acceleration in the growth of the core index, it would increase rate hike expectations for July and trigger a buying response in the US dollar. However, considering the volatility of the stock market, it is worth considering the possibility that the initial reaction in the foreign exchange market could shift towards the Japanese yen. The release is scheduled for 9:30 PM Japan time.
Prior to that, it is important to check the UK-related developments. Following a series of UK employment statistics released at 3:00 PM Japan time, which showed strong results such as employment growth and accelerating wages, there was increased buying of the British pound. There are scheduled speaking opportunities for UK financial officials. Megan Green, the successor to Committee Member Tenreiro, who is expected to take a more hawkish stance than Tenreiro, will testify in Parliament. Additionally, Governor Bailey of the Bank of England will give testimony on central bank independence, and Committee Member Haldane, known as a dove, will deliver a speech.
we are awaiting the release of the Consumer Price Index (CPI). Pay attention to the subsequent movement of USD. If there is a strong USD selling trend, we plan to target buying opportunities in gold and AUD/USD.