U.S. February CPI to be released: inflation remains stable but above target, focus on USD and EUR/USD movements

March 11 News: The U.S. Bureau of Labor Statistics (BLS) will release the Consumer Price Index (CPI) data for February this Wednesday. The report is expected to show that inflation remains stable but still above the Federal Reserve’s 2% long-term target. Market consensus predicts that the overall CPI for February will increase by 0.3% month-over-month, with an annualized rate of about 2.4%, while the core CPI (excluding food and energy) is expected to rise by 0.2% month-over-month, with an annualized rate of approximately 2.5%.

Recent fluctuations in energy prices have had limited impact on inflation. Since the joint U.S.-Israel military action against Iran on February 28, West Texas Intermediate (WTI) crude oil prices surged from around $67 per barrel to over $110 before pulling back. These fluctuations have not yet been fully reflected in this CPI data. The latest Purchasing Managers’ Index (PMI) from the Institute for Supply Management (ISM) shows that manufacturing input prices rose to 70.5, while service sector input prices fell to 63, indicating a divergence in input price pressures. TD Securities analysts note that easing service sector inflation could boost the Federal Open Market Committee’s (FOMC) confidence, with expectations of about 0.23% month-over-month for core CPI and around 0.25% for overall CPI.

The CPI release will also influence the dollar’s movement and the EUR/USD exchange rate. Markets expect a high probability that the Federal Reserve will keep interest rates unchanged in March, with only about a 12% chance of a 25 basis point cut in April. If the monthly core CPI unexpectedly falls below 0%, the dollar could face selling pressure; if it exceeds 0.3%, it may support the dollar and delay market expectations for rate cuts. Eren Sengezer, Chief Analyst at FXStreet during the European session, notes that the EUR/USD daily RSI is below 50, indicating limited upward momentum. The 1.1675-1.1700 zone acts as a strong resistance, with support levels at 1.1600-1.1590 and 1.1500-1.1470. Technical resistance may be at 1.1750 and 1.1820.

Overall, the market is cautiously watching how inflation data might influence Fed policy, as well as how geopolitical tensions and energy price fluctuations could impact the short-term trends of the dollar and EUR/USD.