US CPI KEY TAKEAWAYS:
- Current US CPI expectations suggest a 2.6% year-over-year headline inflation rate, with “core” inflation (excluding food and energy) anticipated at 3.3% year-over-year.
- Speculation indicates that the Federal Reserve may proceed with a 25 basis point interest rate cut irrespective of the inflation data; however, an unexpectedly high inflation figure could lead to reevaluation.
- The USD/CAD currency pair has surged past the crucial 1.4100 level, indicating potential for further gains as we await US CPI data and the Bank of Canada meeting.
When is the US CPI report?
The upcoming US CPI report for November is set to be released at 8:30 ET (13:30 GMT) on Wednesday, December 11.
What are the US CPI Report Expectations?
Analysts project that the headline CPI will register at 2.6% year-over-year, while the core inflation reading is expected to reflect 3.3% year-over-year.
US CPI Forecast
The Federal Reserve is keenly balancing the aim of full employment—reporting mixed outcomes as recent jobs data showed higher-than-expected job creation alongside a rise in the unemployment rate—and inflation, which has stabilized around the 3% range after a notable drop in 2022 and 2023. Most recent comments from Fed officials suggest a consensus towards a potential 25 basis point cut in December, though this isn't a universally accepted view at the moment.
Although the Fed places primary importance on a different inflation measure, the Core PCE, the CPI report remains critical for traders due to its earlier release. Recent trends indicate that the year-over-year CPI has begun to decrease from its peak in 2022, yet economists anticipate a rebound to 2.6% this month:
Source: TradingView, StoneX
The chart illustrates that the "Prices" component of PMI reports—a crucial leading indicator for CPI—has maintained an index level in the mid-50s, reflecting persistent pricing pressures at a stabilized level.
Importantly, one should consider the “base effects” associated with the annual calculation. With last November's modest 0.1% month-over-month figure dropping out of the equation after the upcoming report, we may see a rise in the year-over-year CPI figure if this month’s reading exceeds that of last year.
US Dollar Technical Analysis – USD/CAD Daily Chart
Source: StoneX, TradingView
In the context of the US dollar, the USD/CAD pair is positioned intriguingly ahead of the inflation report and the Bank of Canada meeting occurring shortly after. The pair has been trending upwards since mid-September and has successfully moved past the Fibonacci resistance near 1.41. Following a retest of that level and a strong rebound, the current outlook remains bullish, potentially targeting the next Fibonacci level just beneath 1.4300. A reversal breaking below 1.4100 and the rising trendline around 1.4050 would be needed to negate this positive sentiment.
