US CPI for September is expected to show faster price growth, a result that could reshape expectations for Federal Reserve policy and move the US Dollar. Forecasts point to monthly CPI rising 0.6% after 0.4% in August, lifting the annual rate to 3.6% from 3.4%. Core CPI is seen at 0.2% m/m and 2.5% y/y. Energy remains in focus: West Texas Intermediate gained about 5% over the month, while US diesel rose from $5.6 to $6.38 per gallon, up about 14%. Diesel price changes are estimated to explain roughly 70% of the variation in US inflation surprises, and a 1% y/y increase is linked to a 0.06 percentage point rise in the inflation surprise.
US Rate Policy and Inflation Dynamics
Rate-hike pricing has cooled, with markets placing about an 80% probability on a hold at the next meeting, while December pricing implies roughly an 85% chance rates are higher than current levels. Labour data showed Nonfarm Payrolls at 29K versus 90K expected, and unemployment at 4.2% from 4.1%. A 0.7% or higher CPI print could revive October hike expectations and pressure EUR/USD, while 0.4% or lower could support the pair, though euro sentiment remains constrained by France-related risk premia and OAT spreads.
FX Market Implications and Technical Levels
Technical levels cited include 1.1150, 1.1325, 1.1100, 1.1060, 1.1000, 1.1260 and 1.1320, alongside a 20-day SMA at 1.1325. Polling figures referenced show 30% versus 20%.
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