Market participants are now eagerly awaiting the release of the next US Consumer Price Index (CPI) report on Tuesday, February 14, for a fresh catalyst for US Dollar direction. Economists at MUFG expect the greenback to be underpinned by a strong inflation report.

Headline and Core inflation to increase by 0.5% and 0.4% respectively in January

“US economists are looking for a stronger US CPI report for January bringing an end to the run of three softer reports at the end of last year.”

“One of the key drivers for the expected pick-up inflation in January has been the rise in used car prices at the start of this year. Bloomberg reported yesterday that average used-vehicle prices rose 2.5% in January according to data from Manheim. The current Bloomberg consensus forecast is for headline and core inflation to increase by 0.5% and 0.4% respectively in January.” 

“A stronger inflation report would make it harder for the US Dollar to resume its downward trend in the near-term even if it is driven more by one-off factors.”