The Bureau of Labor Statistics in the US is scheduled to report the most recently observed changes in the headline inflation rate for December 2019.
The current forecasts are projecting another hike by 0.2 per cent, which, if realised, would result in the Consumer Price Index reaching 2.3 per cent on an annual basis.
Thus, inflation would surpass the 2 per cent symmetric target level, which is set by the Federal Reserve. In doing so, the FOMC would have a reason to increase the interest rate in order to prevent the soaring prices from blowing out of proportion.
US Inflation Rate. Image source: TradingEconomics.com
The rising consumer prices are resulting from the robust labour market in the country and primarily from the increased earnings of American workers. Higher aggregate income leads to heightened consumer spending, bolstering the net CPI.
Thus, the apparent strengthening of the US economy as exhibited by these two crucial indicators – inflation and employment – might be enough to compel the Committee to take actions preventing the potential overheating of the economy.
Meanwhile, the EURUSD continues to consolidate just above the minor support level at 1.10906, which is the 38.2 per cent Fibonacci retracement.
The prevailing momentum is currently turning bearish, a process which is likely to be bolstered by the release of Tuesday’s inflation data.
EURUSD 1D Price Chart. Image source: Trendsharks ©, created with TradingView.com
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