US CPI and Market Impact Overview What Should You Trade?

In December, US headline inflation climbed to 0.4% month-on-month, outpacing the prior month and Bloomberg's consensus estimate of 0.3%.

Inflation on USA 

Energy prices were the primary driver, surging by 2.6% and accounting for nearly half of the inflation uptick. Meanwhile, core inflation softened to 0.2% month-on-month from November’s 0.3%, reflecting easing pressures in core goods and stability in core services, particularly shelter costs.

Percent changes in CPI for All Urban Consumers (CPI-U): U.S. city average

Year-on-year, core inflation edged down to 3.2%, reinforcing expectations of a continued Federal Reserve rate-cutting cycle. The resulting decline in the US dollar index (DXY) and Treasury yields indicated market alignment with this outlook. However, despite this temporary dip, underlying conditions such as elevated energy prices and global uncertainties could rekindle USD strength in the near term as we can see already the comeback after the dip in the image below on DXY.

DXY Chart 15 minutes 

Based on this analysis I’m looking to long the USD against the EUR you can find the full analysis and entry points in HERE.

The only down point to this scenario would be great data coming from Eurozone, but based on the political instability going on in France the higher probability is that the ECB will continue to be dovish and maintain rates at this pace of cutting. 

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